Last week's tsunami of tech earnings, led by Apple's jaw-dropping quarterly report, has given market watchers something to cheer about and also points to industry shifts around tablets and cloud computing.
The fourth quarter of 2011 was not kind to all vendors, as economic concerns affected spending on tech and floods in Thailand continued to have ripple effects on the global component supply chain. These were some of the main reasons analysts were expecting a soft fourth quarter for 2011 and slower growth for 2012.
For example, a few weeks ago, Gartner announced that it had lowered its 2012 forecast, with IT spending expected to rise only 3.7%, compared to the prior forecast of 4.6% growth. Highlighting faltering global economic growth and the eurozone crisis, brought on by enormous debt in countries including Greece and Italy, Gartner said global IT spending in 2012 will total $3.8 trillion.
But the actual results from the fourth quarter have sparked some confidence in technology. At the close of trading on January 26, tech stocks on the Nasdaq were up a healthy 7.77% since January 1. By Friday afternoon, Nasdaq computer stocks had inched up another 0.5%. Bellwether vendors, including those with strong results this week, have been rewarded with a jump in share prices. For example, EMC shares were up by $0.14 to $25.79 and American Depository Shares of SAP were up by $1.01 to $60.29 Friday afternoon. Apple, recently regaining its position as the most highly valued company on the planet in terms of market capitalisation (share price multiplied by number of shares), was up by $1.21 to $445.79.
Apple is the superstar of earnings season so far, beating expectations for sales and profit and surging past forecasts for iPad, Mac and iPhone, all of which set sales records for the company.
The company posted record quarterly revenue of $46.33 billion and record net profit of $13.06 billion, compared to revenue of $26.74 billion and net quarterly profit of $6 billion in the year-ago quarter.
"Apple posted remarkable December quarter results," according to T. Michael Walkley and Matthew D. Ramsay in a research note for Canaccord Genuity. Looking ahead to the rest of the calendar year and also at 2013, the analysts wrote: "We believe Apple is well positioned for very strong C2012/13 sales and earnings growth driven by new product introductions, including the pending refresh of MacBook Air, the iPad 3 launching this spring, an LTE iPhone likely in CQ3/12 and potentially Apple TV exiting C2012."
The earnings report signalled two trends in IT: the rise of tablets and the imminent end of Microsoft's dominance in the enterprise. The report made it clear that Apple sold more iPads in the fourth quarter - 15.4 million - than any PC manufacturer sold personal computers.
In addition, more and more Apple products are being used by professionals, according to Forrester analyst Frank Gillett. "Turns out that 21% of information workers are using one or more Apple products for work," he wrote in a blog accompanying his report. "Almost half of enterprises (1,000 employees or more) are issuing Macs to at least some employees - and they plan a 52% increase in the number of Macs they issue in 2012."
Another big trend - the shift to cloud computing - was underscored by EMC results this week, which beat analysts' expectations. The data-storage giant called for double-digit increases for both earnings and revenue in the year ahead. During the company's earnings call, CEO Joe Tucci credited the corporate shift to cloud computing: "There's no doubt that cloud computing is completely transforming the IT industry and that big data promises to have a similarly profound effect on transforming the way we work and live."
EMC said fourth-quarter revenue increased 17% to $5.6 billion, while net earnings increased by 32% to $832 million.
SAP's earnings report gave credence to analyst forecasts for a strong year for enterprise software. The ERP vendor reported that it beat its own expectations for both revenue and profit in 2011, its best year yet, and is on its way to topping its sales goal of €20 billion (US$26 billion) in 2015.
SAP said fourth-quarter revenue increased year over year by 11%, hitting €4.5 billion, while net profit jumped 176% to €1.2 billion. The percentage gain was helped by a provision in the year-ago quarter that set aside money for a lawsuit filed by Oracle and dampened reported profit.
Nokia's results Thursday pointed to the further decline of the Symbian OS in the mobile device market. While sales of Windows Phones have gotten off to a good start for the company, the decline in sales of Symbian devices caused a 21% year-over-year drop in sales, to €10 billion. The company's loss was €1.07 billion, compared to a net profit of €745 million a year earlier. Nokia says it has sold "well over" one million Nokia Windows Phones, exceeding analyst expectations, but matching the momentum of either the iPhone or Android-based devices will be tough.
Meanwhile, in the search business, Yahoo's results suggest the beleaguered search company has little hope of generating any momentum against Google. The company said gross revenue for the quarter declined 13% year over year to $1.32 billion, while net income fell 5% to $296 million. In contrast, Google, which reported last week, increased revenue 25% year over year.
As feared, floods in Thailand did have an effect on chip maker Advanced Micro Devices, which reported a fourth-quarter loss of $177 million compared to a profit of $375 million a year earlier. Sales were flat at $1.69 billion.
Flooding in Thailand caused a hard-drive shortage, leading to weak demand for add-in graphics boards, the company said. A write-down in the value of an investment in its former GlobalFoundries unit and restructuring costs further weighed on net income.
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