Sunday, 21 July 2013

Disappointing figures all round?

It seems that now might not be a good time to invest in IT firms with both IBM and Intel reporting drops – Intel saw second quarter profits down 29% from last year at $2bn, and IBM’s earnings fell by 17% to $3.23bn.

When you look at revenues, you’ll see Intel’s fell by 5% and IBM’s by 3%. You’ll remember that last quarter IBM cut a large number of jobs (over 3,000) and started to make a big deal of its Big Data strategy and cloud computing. Intel is really being hit because of the drop in PC sales as people migrate to smart phones and tablets – and around 95% of those use ARM chips.

IBM’s sales were down 3.3 per cent to $24.92bn, and IBM reported adjusted second-quarter earnings of $32.91 a share. It also raised its guidance for the year and said it expects at least $16.90 a share in adjusted earnings. IBM saw zero revenue growth in its “growth markets”, the so-called emerging markets. Its earnings per share were reasonable and that was due to the earlier cost-cutting measures. IBM announced $1 billion write-off for downsizing. Services sales dropped by 5%, hardware sales dropped by 12%, but software revenue went up by 4%. Intel’s shares fell 3.7% to $23.23 after the company cut its forecast for the year.

It was also bad news for eBay, whose shares fell 6.4% to $53.70 after announcing their second-quarter results.

SAP AG, one of the biggest makers of business-management software, experienced its first software-sales decline in more than three years. Software licences fell around 3% to 982 million euros. Its software sales in Asia dropped by 9%.

Back in May, PC vendor, Dell, reported a 79% drop in net profit, which they attributed to a crash in PC sales as consumers migrate to smartphones and tablets. Dell’s net profit fell to $130m on revenue down 2% to $14bn. Michael Dell is still waiting for a vote on his proposal to buy out the company. He plans to transform the company from a PC vendor to one pushing higher-margin software and services to enterprises. He’s apparently got a $2bn loan from Microsoft.

But it’s not all doom and gloom, doing well is Sandisk, who reported a 43% jump in second-quarter revenue. Yahoo! posted an attributable net income of $331.15m for the second-quarter, which is an increase of 46%, which it attributes to its investment in Chinese e-commerce firm Alibaba and product overhauls. However, its revenues declined by 7% to $1.13bn and that was attributed to a decrease in advertising revenues and Web traffic.

Interestingly, in the USA, tech advertising has increased by 30% with Microsoft, now being the biggest spender. Its spending on advertising has gone up 200% in an attempt to drum up business for Windows 8 and its Surface tablet. It will be interesting to see what effect this has on the company’s bottom line.

So, the picture isn’t all bad for IT companies, and some companies are trying to do something about it, and perhaps dividends are OK, but, taken together, the figures don’t make the happiest of reading for the IT industry as a whole.

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