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A mixed quarter

A mixed quarter

A session spent poring over the latest quarterly results gives some clues about diverse industry trends

Overall, IT business leaders are an optimistic bunch. Although the industry is maturing and changing dramatically, most feel they will emerge from this transition successfully. It is difficult, though, to read a newspaper or browse the Internet, or even turn on TV without finding commentary, opinion, gossip, or rumours about all kinds of issues.

Many of the larger vendors are placing more emphasis on short term issues, particularly those that are likely to affect the next quarter's reporting. Poring over numerous quarterly reports provided some insights into their likely directions.

In the wake of the Microsoft-Yahoo merger collapse -- but apparently they are still open for more talks and there have been stories flying around about Steve Bullmer's future -- Microsoft reported in its third quarter results that sales of Windows software and overall revenue are falling below expectations. Now who will they buy?

Meanwhile SAP also reported a steeper than expected drop in quarterly profit affected by the weakening dollar, the Business Objects acquisition, and investment in its SaaS initiative, Business ByDesign. SAP is now looking to reduce its investment in Business ByDesign and focus on just six countries, down from the original 15 countries.

Sun Microsoft's chief executive Jonathan Schwartz commented that Sun was hampered by weaknesses in the US economy that "presented Sun with significant challenges" and overwhelmed the progress the company had made in developing nations. Sun reported a loss for the quarter and said it would cut up to 2500 jobs.

In the midst of the quarter's reporting, new research from the Standish Group highlighted that open source is decimating the traditional software market. Standish reported that open source is robbing proprietary software vendors of $US60 billion in revenue each year as open source starts to cause havoc throughout the software market.

IBM reported a profit rise of 28 per cent from a year ago as the company recorded strong sales in its global services division and across all its major geographic areas. IBM beat its revenue and earnings expectations substantially with strength across the board. Big Blue also announced a series of new programs and incentives aimed at helping its business partners sell systems and storage to resellers which market embedded solutions that address clients' needs in specific new areas.

Apple's CEO Steve Jobs said the company was delighted to report 42 per cent growth and the strongest March quarter revenue growth and earnings in Apple's history. Mac sales were beyond expectations -- add consumer goods iPod and iPhone into the mix and Apple looks as though it's back on track.

Unisys reported a first quarter operating profit of $US28 million, compared with a loss of $US29.6 million in first quarter 2007. "We continue to improve our operating profit despite some weaknesses in our US business", said Unisys' president and chief operating, officer Joseph McGrath. "We are also pleased with continued growth in outsourcing and double-digit gains in service orders in the quarter".

Vendors are behaving in a manner similar to the changing markets, but in many ways they are really as different as chalk and cheese when it comes to performance and opportunity. During these first few months of 2008 there has been volatility in the markets coupled with challenging year-ago comparisons. Can we read much into the numbers to reach conclusions about where the year will finish up? We also heard that steps are being taken all around to tighten spending and reduce investments as a response to the gloomy economic downturn.

Len Rust is publisher of The Rust Report


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