Tea Leaves from Yearend Vendor Sales

An overview of yearend technology company revenues and earnings may provide a glimpse of what is in store for 2012.

Focal Points:

• On the chip side Intel Corp. saw its revenues in the third quarter grow 29 percent and net income increase by 17 percent while its rival Advanced Micro Devices Inc. (AMD) went from a loss to a profit due to strong sales in chips for laptops and from emerging markets but is about to issue another profit warning. Meanwhile Qualcomm Inc., a mobile phone chip maker, reported stronger than expected sales as a result of rising smartphone demand. On the other hand, Texas Instruments Inc. (TI) reported a 30 percent decline in income due to weak demand and product overhang. TI also projected another quarter of weak sales due to economic uncertainties.
• Cisco Systems Inc. regained its sales strength by showing two strong quarters of sales. The company thinks the current quarter will show revenue growth of seven or eight percent over the previous year's period. Juniper Networks Inc., on the other hand, is less optimistic for the quarter and has lowered revenue projections to the $1.12 billion range from $1.16 billion. It also projects its earnings will be under pressure. Apple Inc. may not set another sales record but it does expect revenues and earnings to rise again but competitor Motorola Mobility, now a part of Google, Inc., issued a warning that its holiday sales were much weaker than expected. Research in Motion, Ltd. (RIM) also warned its BlackBerry sales would fall sharply in its holiday quarter as the company struggles to right itself. Nokia Corp. performed poorly, reporting a third quarter loss of €68 million, although this is a major improvement over the prior quarter's loss of €368 million. Like RIM, Nokia is a long way from a turnaround. 
• IBM Corp. had a good third quarter with revenues increasing eight percent and growth across its products and services lines. The company also raised its full year guidance. Meanwhile, Hewlett Packard Co. (HP) had a tumultuous year with missed results, TouchPad and smartphone write-downs, CEO turnover, and a net income plunge of 91 percent. It is cautiously optimistic for the upcoming year. Dell Inc. saw flat revenues in the last quarter although its net income rose nine percent. Dell CEO Michael Dell is advising the world that the company is moving away from PCs and the hardware business to become a full service provider offering products, services and cloud solutions to businesses. Oracle Corp. stumbled in its last quarter with revenues up two percent. While its software revenues grew, new software license revenues shrank as did hardware systems revenues. Meanwhile, Salesforce.com Inc. reported better than expected revenues and earnings but warned its fourth quarter earnings may fall short of expectations. Microsoft Corp. experienced a good quarter with Windows revenues showing its first year-over-year gain since the end of 2010. On the other hand, Amazon Inc. saw its third quarter net income fall by 73 percent even though its revenues increased. Its cloud business saw double digit growth and its new tablets had extremely successful launches.

Experton Group believes the tealeaves portend 2012 will be a good year overall for technology providers but not every vendor will benefit. Smartphones and tablets will have a dampening effect upon PC sales but from a corporate standpoint PC sales will be strong. However, RIM will be impacted by BlackBerry subscriber losses in North America and possibly elsewhere. Apple and Android smartphones will move further into the enterprise. Cloud, networking and server capacity demands will increase throughout 2012, which should be good news for most of the enterprise cloud and hardware players. IT executives should understand the various vendor business and technology model options and determine which ones best fit current and future requirements. Then IT executives should use the business and economic uncertainties to their advantage and press vendors for their best deals in terms of price, additional services, service levels, and terms and conditions.