Some Software Giants Unscathed by Bad Economy

Despite grim stats announced on Thursday by Microsoft in its fiscal second-quarter report, at least one company in the software IT sector reported positive 2008 quarterly earnings. IBM announced on Tuesday that it had a "strong fourth quarter [that] capped an outstanding year."

IBM described a fourth-quarter net income of $4.4 billion, up 12 percent over its previous fourth quarter.

In contrast, Microsoft reported a net income of $4.1 billion in its second quarter, down 11 percent compared with the previous year's second quarter.

Google's fourth-quarter net income was $382 million compared with $1.2 billion in the previous year's fourth quarter. However, the company's results had been knocked down by "$1.09 billion in asset impairment charges related primarily to our investments in AOL and Clearwire," according to its announcement.

It may be unfair to compare companies with varying market strengths and focus just on net income, but they all share what's turned out to be a generally dismal economy.

"It's unclear how long the global downturn will last, but our focus remains on the long term, and we'll continue to invest in Google's core search and ads business as well as in strategic growth areas such as display, mobile, and enterprise," said Eric Schmidt, Google's CEO, in a released statement.

Microsoft's second-quarter earnings dip was associated with reduced sales of new PCs, as well as a bad economy.

"Economic activity and IT spend slowed beyond our expectations in the quarter, and we acted quickly to reduce our cost structure and mitigate its impact," said Chris Liddell, Microsoft's chief financial officer, in a prepared statement.

IBM Chairman-President-CEO Samuel Palmisano laid out what he believed was behind the company's success in a down market.

"Clearly our strategic transformation -- migrating to the more profitable segments of the industry, investing in growth regions of the world and driving productivity through global integration -- is continuing to pay dividends," he said in IBM's earnings news release.

IBM's software segment revenues were $6.4 billion, representing a three percent increase compared with the fourth quarter of 2007. The company had a four percent increase in its middleware segment, quarter-to-quarter, although its operating system revenues showed a six percent decrease.

The three companies are engaged in heated software turf battles in some instances. IBM has been making cloud computing announcements in the wake of Microsoft's fall 2008 launch of Windows Azure, a so-called "operating system" in the Internet cloud. IBM also made a push this week into the online applications space with its LotusLive rollout, much to the annoyance of some at Microsoft.

Google still dominates Internet search advertising, with Microsoft running in a distant third place. Google is also getting more involved in the enterprise hosted applications space. Last week, the company announced an expansion of its Google Apps partner program.

"By focusing on the one million Google Apps business customers, [you] can get enterprise-quality applications hosted by Google at a dramatically lower price," Google's Schmidt said.

About the Author

Jim Barthold is a freelance writer based in Delanco, N.J. covering a variety of technology subjects.


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