The torrent of quarterly earnings reports continued this week, with major computer and telecom companies announcing sales and earnings that, for the most part, were well above the dismal results achieved a year ago during the depths of the recession.
Drilling down into some of the salient figures for key bellwethers reveals trends that should play out for the next few quarters. Though in many cases profit was up significantly, revenue was flat -- or at least, not greatly higher -- for some companies, so it is becoming clear that some sectors of tech and communications will emerge from the recession more quickly than others. Sales, or revenue, is arguably a better indicator of how far the sector has come since the recession, since profit numbers are being boosted by job cuts and restructuring implemented over the past year.
Because of the breadth of its software, hardware and service offerings, and the geographic scope of its business, IBM was one of the more important players reporting results this week. Starting what might be the busiest week of the quarter for tech investors and market watchers, IBM announced Monday that revenue for the first quarter rose 16 percent to US$22.9 billion and income increased 13 percent to $2.6 billion, compared to the year-earlier period.
While the increases may not sound as extraordinary, in terms of percent gain, as those from other major tech companies this week, IBM did not suffer as badly as other vendors during the recession because of its broad product range and global scope. It's easier for companies who were hit harder in 2009 to achieve big year-over-year gains, because the comparison being made is to a terrible quarter.
Nevertheless, IBM's report bodes well for tech in general, because it said it experienced growth across its various product lines and across geographies.
One of the stars of the week was, as usual, Apple. On Tuesday the company said iPhone and Mac shipments helped quarterly profit skyrocket by 90 percent to $3.07 billion, while revenue jumped 49 percent to $13.5 billion, compared to the same period in 2009.
The big news for the consumer and communications market was that iPhone shipments hit 8.75 million, up by a whopping 131 percent.
"We're thrilled to report our best non-holiday quarter ever," crowed Apple CEO Steve Jobs in the earnings announcement. Apple has continued to generate buzz lately because of continuing improvements to the iPhone and its new iPad tablet PC, which have had a so-called halo effect on sales of Macs.
Apple is a one-of-a-kind company. However, one thing is clear: The iPhone is setting the pace in the mobile market, and more and more people want high-end mobile devices. Apple sales of 8.75 million iPhones worldwide in the quarter, for example, handily beat analyst expectations.
Meanwhile, Nokia, whose strength is in the low end of the mobile device market, reported quarterly results Thursday that were lower than expectations, though better than last year's numbers. The company's income rose to €349 million (US$465 million), up from €122 million a year ago, while revenue grew by only 3 percent, to €9.5 billion.
The iPhone gave a nice sales boost to AT&T -- the only carrier in the U.S. whose network runs the device. AT&T activated 2.7 million new iPhones last quarter, and of these about 900,000 were for new customers. New wireless customers are what it's all about these days for telecom companies, since fixed-line revenue has been dropping for years. Unfortunately, both AT&T and Verizon this week reported that though they added wireless customers, growth in that segment is slowing.
AT&T said Wednesday that first-quarter profit fell 21 percent to $2.48 billion. The drop was mainly due to one-time health care costs, but revenue was $30.65 billion, essentially flat from the 2009 quarter. Verizon Thursday said net income for the first quarter was $400 million, down from $1.6 billion a year earlier. The drop was also mainly due to one-time health charges, but revenue was up only 1.2 percent from last year, at $26.9 billion.
Quarterly results also picked up this week in the Internet arena. Yahoo Tuesday said quarterly revenue was up 1 percent compared to the same period in 2009, to $1.59 billion, while net income was $310 million, up from $118 million. Yahoo benefitted from the sale of Zimbra and reimbursements from Microsoft related to the companies' search deal.
EBay said Wednesday that revenue for the first quarter increased by 9 percent to reach $2.2 billion, while net income increased by 11 percent to $398 million. Meanwhile, Amazon on Thursday reported that quarterly revenue rose 46 percent to $7.13 billion, while income increased 68 percent to $299 million.
Capping off the week for earnings, Microsoft on Thursday announced record fiscal third-quarter revenue of $14.50 billion, up 6 percent from the same period last year. Net income was up 35 percent, at $4.01 billion.
Windows 7 was a strong earner for the company, and an uptick in corporate purchases bodes well for the enterprise software arena.
"Business customers are beginning to refresh their desktops and the momentum of Windows 7 continues to be strong," said Kevin Turner, chief operating officer, in the company's earnings statement. "We are also seeing tremendous interest in our market-leading cloud services for business."
Even though Microsoft reported strong results after the market closed, the tech-heavy Nasdaq ended up at 2519, a level not seen since the second quarter of 2008. While sales of low-end mobile phones and uptake of wireless services in the U.S. are leveling off, it appears clear that enterprise IT and Web consumer business are on a growth path.