It's All About the Earnings
Ah, earnings season -- that special time that happens every quarter when the
publicly traded giants lay bare their numbers and give us a glimpse at how they're
Say what you will about global strife, global warming and global Harry Potter-mania
-- things are looking pretty good at Microsoft and across much of the tech sector.
This special edition of Redmond Report will give you a glimpse at how some of
your favorites have weighed in for this quarter:
Xbox Can't Keep Microsoft Down
Even though they took a huge hit of slightly more than $1
billion to fix troubles with the Xbox, the Redmondians still reported a
increase in earnings for the quarter. Not even the otherworldly villains
of "Halo" can chip away at the Windows and Office juggernauts.
Microsoft's fourth quarter profit was $3.04 billion. In the same quarter last
year, its profit was a meager $2.83 billion. Revenue for this quarter was $13.37
billion, compared to $11.8 billion last year. Nice to see a bunch of kids from
the Pacific Northwest doing so well.
As this was the close of the fourth quarter, Microsoft also checked in on its
full fiscal year, and looked into the Magic 8-Ball for next year. For the 2007
fiscal year, Microsoft reported a whopping $51.12 billion in revenue, a 15 percent
increase from last year. Next year, it expects to bump that up by $300 million.
The Windows, Office 2007 and server and tools divisions were all up from last
year. Microsoft's online efforts, while bringing in more dollars than last year,
saw the gap widen between formidable arch rivals Google and Yahoo.
Big Blue Keeps Cruising
up its earnings for the quarter over last year by a healthy 12 percent margin
overall. Big Blue says strength in its software and services sales helped fuel
Selling its printing division also helped IBM fortify the quarter's results,
bringing in an $81 million pretax bump. Straight revenue for the second quarter
was $23.8 billion, up from $21.89 billion last year, a 9 percent increase. Profits
for the second quarter were $2.26 billion (including the printer division sale),
up from last year's $2.02 billion during the second quarter.
Breaking it down by regions and divisions, IBM looks quite good to the gray
pinstripes on Wall Street. Revenue in North and South America was up 6 percent,
to $10.1 billion. Revenue in Europe and the Middle East increased 13 percent,
to $8.2 billion. In the Asia-Pacific region, revenues were up 10 percent, to
Software sales pulled in the biggest increase for IBM. While hardware only
grew by 2 percent to $5.1 billion, software was up 13 percent to $4.8 billion.
Services were also a big contributor with an increase of 10 percent, to $8.76
Looks like those old ads that stated "No one ever got fired for buying
IBM" haven't lost their luster. Now, the same could be said on a personal
level for buying IBM stock.
EMC Makes Huge Jump
You're loving life if you have some shares of data storage heavyweight EMC Corp.
Its second quarter profit jumped
almost 20 percent. If Microsoft and IBM's quarterly performances didn't
leave Wall Street tongues wagging, EMC's certainly will. If you're keeping score,
EMC has posted double-digit revenue growth for the last 16 quarters.
Profits for EMC's second quarter this year were $334.4 million, up from last
year's quarterly profits of $279.1 million. Software licenses were the big cash
cow, with a 27 percent increase. Storage is still the bread and butter at EMC,
with a solid 18 percent growth.
Advanced Micro Devices Doesn't Advance
It wasn't a banner quarter for everyone, though. You know you have a tough road
ahead of you when your primary competitor is a thoroughbred like Intel.
Advanced Micro Devices, or AMD for short, is doing its best to get its chips
out there. It posted its third
consecutive losing quarter. This quarter's loss was $600 million. This is
quite a shift from last year, when AMD was chipping away at Intel's market share
and racking up a quarterly profit of $88.8 million. AMD ended up with nearly
25 percent of the market at the end of last year.
Besides cutting prices this year to compete with Intel, AMD also dropped $130
million when it bought ATI Technologies. Those two factors can make for a tough
quarter when it comes time to count the beans.
How do the rising and falling fortunes of these technology stalwarts affect
you? How much do quarterly reports affect your buying decisions? Do they affect
your personal fortunes? If you had a million to drop on tech stocks, where would
you spend it? Send me your tips...I mean, send me your thoughts at [email protected].
Mailbag: Thoughts on Microsoft Research, More
On Monday, Doug asked readers what they thought about Microsoft Research, which
some have criticized as being all show and no product. Here's what Dean has
I would think Microsoft Research would have learned its lesson from Xerox
PARC not capitalizing on marketable ideas, with the emphasis on marketable.
Perhaps the demos are cool and groovy in the lab but are not practical
or are cost-prohibitive, or focus groups show that no one would really buy
And Les chimes in with his thoughts on the trade deficit in the U.S. tech sector:
Bean counters (greed) and the short-term thought process is the driving
force behind this deficit. We don't manufacture everything we buy so now we
must buy what we used to make or never made in the first place.
One reader who wrote in recently buys only American-made and American-owned
when possible. That is great, but I don't have that kind of money to throw
away. I bought a foreign-made car and it has NOT had one recall or a trip
to the repair show yet. I saved money here that I can now use to buy more
products and services. I also agree with the comment that people must be willing
to sacrifice. The problem with this is the only ones that will ever have to
sacrifice are the workers and not the executives.
Quality is important for the products that I buy. Why would Microsoft
push out an operating system that has defects? Why would American car manufacturers
push defective cars out the door that must be recalled later? Is someone going
to miss a bonus? Anyone that has ever worked in a manufacturing plant knows
The big problem with the trade deficit is our manufacturing leaders.
They must change or watch their market grow smaller and smaller. If they don't,
all of us will have to learn to say, "Would you like fries with that?"
Tell us what you think! Send an e-mail to [email protected]
or leave a comment below.
Lafe Low is the editorial liaison for ECG Events.