Wall Street Beat: Enterprise spending helps mixed quarter for tech

Google's revenue fell short of analysts' high expectations, but sales of enterprise IT boost results for IBM, Intel and Microsoft.

There were weak spots in the last quarter of 2011 for sector bellwethers Google, IBM, Intel and Microsoft, but corporate demand for technology appeared to remain resilient going into what is expected to be a year of slower growth for global IT spending.

The deepening debt crisis in Europe and a hard-drive supply disruption caused by floods in Thailand have raised concerns that sales for tech vendors would slow, and skittish investors appeared to be focusing on the negative aspects of the wave of earnings reports Thursday. For example, Google, weighed down in part by heavy expenses as it gobbles up new workers, missed analyst forecasts by a fairly wide margin. In late Friday morning trading in the U.S. the Nasdaq Computer Index was down slightly, by 4.34 points to 1,469.34.

However, the tech titans announcing quarterly reports this week for the most part reported year-over-year increases in results.

"We had a strong fourth-quarter performance, capping a year of record earnings per share, revenue, profit and free cash flow," said Ginni Rometty, in her first official statement on IBM's finances since taking the helm as the company's president and chief executive officer on Jan. 1. She succeeded Sam Palmisano, who has remained chairman.

IBM, an important indicator for corporate IT spending because of its global reach and broad portfolio of enterprise-oriented servers, software and services, reported revenue of US$29.5 billion, up 2 percent from the same quarter in the prior year, while net income was $5.5 billion, up 4 percent. Revenue fell slightly short of analyst expectations of $29.7 billion, but operating earnings per share rose 11 percent to $4.71 per share, handily beating the $4.62 forecast of analysts polled by Thomson Reuters.

IBM's strategy for years has been to focus on services and high-margin products, which has tended to boost profit faster than sales. But sales for the quarter were solid in the so-called BRIC countries (Brazil, Russia, India and China), where revenue increased by 10 percent year-over-year. In a sign of confidence in the year ahead, IBM said it expects earnings of at least $14.85 per share, higher than analyst forecasts of $14.82, according to Thomson Reuters. IBM also said it is on track to hit earnings per share of $20 in 2015.

One positive surprise this week was Intel's results. The company issued an earnings warning last month, saying that Thailand floods would disrupt the PC supply chain. This had the effect of lowering analyst forecasts. On Thursday, however, Intel released numbers that beat analyst's lowered estimates, saying that PC sales in the quarter had done better than had been feared. Intel's net income rose year over year by 11 percent, to $3.5 billion, while revenue rose a strong 21 percent to $13.9 billion.

"Intel's strong earnings come as the company is trying to move outside its core PC computing business amidst a sagging PC market into new areas," according to a research note from Canaccord Genuity. "Intel showed off some of its emerging strategy at CES last week where it showed off super thin and powerful laptops, dubbed Ultrabooks."

Microsoft's profit was essentially flat compared to the year-earlier quarter, as Windows sales flagged due to soft demand on the part of consumers, the company said. But sales to businesses appear to be strong. About 200 million licenses of Office 2011 have been sold in the past year and a half, while in the fourth quarter alone, Exchange and SharePoint sales jumped 10 percent and revenue from Lync and Dynamics CRM increased more than 30 percent.

Total sales for Microsoft for the period were up 5 percent year over year to $20.89 billion, while net income came in at $6.62 billion, down slightly from $6.63 billion. The company's Entertainment & Devices Division made a strong contribution to the bottom line as well, chalking up revenue of $4.24 billion, up 15 percent.

Google, however, may be grabbing the most headlines so far this earnings season since it missed the high expectations of market watchers, who have been used to the company blowing past forecasts. Google's revenue jumped 25 percent from a year earlier to $10.58 billion. But after commissions and fees paid to partners, revenue was $8.13 billion, below the consensus forecast of $8.41 billion, according to Thomson Reuters. Net income rose 6.4 percent to $2.71 billion. However, after one-time items, earnings per share of $9.50 was below the estimates of $10.50.

One problem for Google is that it is up against extremely high expectations after dominating online search for years and, as its bottom line grows, it becomes more difficult to achieve the sort of percentage gains analysts have been used to seeing. Expenses have also grown quickly, as it hires workers for the many projects it has launched in an effort to move beyond its stronghold in search.

Google appeared to be the big loser on the markets Friday, as shares fell $51.08 to $588.52 in late morning trading. Though that seemed to cast a pall on share prices for IT vendors generally, shares of companies that managed to show strong enterprise sales climbed. Microsoft shares rose by $1.01 to $29.30, while those of IBM increased by $7.23 to $188.78 and Intel gained $0.43 to $26.08.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Marc Ferranti

IDG News Service
Show Comments


James Cook University - Master of Data Science Online Course

Learn more >


Sansai 6-Outlet Power Board + 4-Port USB Charging Station

Learn more >



Back To Business Guide

Click for more ›

Brand Post

Bitdefender 2018

Roam freely in the digital world. Critically acclaimed performance and security at your fingertips.

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?