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.

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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."

The IDG News Service is a Network World affiliate.