By Marc Ferranti
We've seen a move toward shared services around HR, procurement, legal and finance, which liberated 15 percent to 30 percent of overall IT costs for new investments in areas of IT where companies feel they can get a competitive advantage.Jorge LopezVice Analyst, Gartner
While earnings from marquee-name tech companies such as Apple and Facebook disappointed last week, sales of mobile devices and enterprise software showed signs of growth.The deluge of earnings reports offered mixed news about sales but followed a pattern that has become familiar. While the PC and components markets continue to face economic headwinds, smartphones, tablets and corporate software appear to be weathering the storm.
Half of the 175 board directors polled in The Gartner-Forbes 2012 Board of Directors Survey, released last week, said IT is their highest priority for investment in 2012, tied with investments in sales, even though more than half of the corporate executives said they were preparing for a market recession.
"You can't cut your way to greatness," said Gartner Vice Analyst Jorge Lopez in an interview. "There is a sense that businesses are more forward-looking now, that after the recession they cut as much as they could. We've seen a move toward shared services around HR, procurement, legal and finance, which liberated 15 percent to 30 percent of overall IT costs for new investments in areas of IT where companies feel they can get a competitive advantage."
SAP, the biggest ERP (enterprise-resource-planning) vendor in the world, reported on Tuesday that revenue for the second quarter increased 18 percent over the same quarter last year to €3.9 billion (US$4.9 billion), buoyed by record software revenue of more than €1 billion. Net profit was €661 million, up 12 percent from a year earlier. Sales were lifted by €85 million in business from its in-memory platform HANA in the quarter. The HANA platform will work with the company's core Business Suite ERP application modules by the end of this year.
SAP shares rose by $1.51 on Friday to end last week at $65.11.
NetSuite, an up-and-coming challenger to Salesforce.com in the cloud-based ERP software market, also offered an upbeat earnings report, announcing on Thursday that revenue for the second quarter was $74.7 million, up 29 percent year over year. Subscription and support revenue was $61.0 million, a 27 percent year-over-year increase. Excluding one-time charges, net income for the second quarter was $4.8 million, compared with net income of $1.6 million a year earlier.
NetSuite shares jumped $7.53 on Friday to close at $56.75.
While the PC and components markets continue to face economic headwinds, smartphones, tablets and corporate software appear to be weathering the storm.
On the smartphone front, Samsung Electronics reported on Friday that thanks in large part to its mobile phone business, quarterly profit skyrocketed 48 percent year over year to 5.19 trillion won (US$4.5 billion), while revenue was up 21 percent to 47.6 trillion won.
Samsung shipped 50.5 million smartphones in the quarter, more than double from a year earlier, compared with 26 million by Apple, according to a Strategy Analytics report Friday.
Apple itself on Tuesday reported that iPhone sales for the quarter ending in June increased by 28 percent year over year to 26 million units. IPad sales increased 84 percent year over year to 17 million units. Sales of Macs, however, increased only 2 percent year over year to 4 million. The results are in line with reports from other vendors this quarter that show tablets and mobile Internet-connected devices booming while PC sales stay flat.
Apple, however, is burdened with heavy expectations. Even though revenue for the quarter was $35 billion, up from $28.6 billion a year earlier, it fell short of the $37.2 billion consensus forecast from analysts polled by Thomson Reuters. Net profit for the quarter was $8.8 billion, up from $7.3 billion last year. Though sales of iPhones were strong, they may have been curbed by users who postponed purchases until the debut of the new iPhone, expected later this year. After dipping in the wake of the earnings report, Apple shares rose by $10.28 Friday to $585.16.
Evidence that the PC and components market remains soft came from Texas Instruments, which reported Monday that second-quarter revenue was $3.3 billion, down from $3.5 billion a year earlier, and profit was $4.46 million, down from $672 million.
Company officials blamed economic turbulence.
"Although we believe customers and distributors have low inventory levels, the global economic environment is causing both to become increasingly cautious in placing new orders," said TI CEO Rich Templeton in a statement.
Facebook's earnings report Thursday created the most turbulence among tech-oriented stocks. In its first quarterly report as a public company, the social networking giant reported 32 percent year-over-year growth in revenue, to $1.18 billion, and a net loss, due mainly to share-based compensation in the wake of its initial public offering. Adjusted for one-time expenses, earnings per share were in line with analysts' expectations at $0.12. Revenue was slightly above expectations.
However, analysts noted that the revenue growth rate had slowed from prior quarters. Company officials also noted that while the number of mobile Facebook users increased, the company faces challenges in monetizing its user traffic. One big issue is that Facebook must be careful not to crowd mobile screens with too much advertising. The company declined to give guidance on results for future quarters. Company shares dropped by $3.14 to $23.70 Friday, down from the $45 high the company reached on its IPO day in May.
Elsewhere Friday, tech shares did well in what ended up being a strong day on the markets. With the tech-heavy Nasdaq leading the way, all major markets in the U.S. rose on hopes that central bankers in Europe and the U.S. will take further steps to jump-start the economy. On Thursday, for example, European Central Bank chief Mario Draghi was reported saying that he would take any steps necessary to save the euro, which has been pummeled by fears that sovereign debt in Greece and Spain would pull apart the euro zone. Tech stocks on the Nasdaq, not including telecom companies, rose in aggregate by 2.4 percent.
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