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Wall Street Beat: Despite gov't cuts, tech spending overall shows signs of life

Marc Ferranti | Nov. 1, 2013
Though the shutdown and spending cuts by the U.S. government are taking a toll on IT sales this year, market surveys and financial results from the likes of Apple and Facebook this week show some positive signs for tech.

Android products once again drove much of the shipment growth in the market as iOS growth stalled and Windows tablets continued to struggle to win over consumers, IDC said. IHS data showed essentially the same trend.

"The erosion in Apple's unit shipment market share was inevitable," said Rhoda Alexander, director, tablet research for IHS. "Cheaper almost always wins the volume race, and competitors were quick to adjust pricing when it became clear that it was impossible to achieve anything close to Apple's unit growth at the same price level."

Apple on Monday reported that quarterly profit dropped despite higher sales of iPhones, as iPad sales flattened out and Mac sales slowed. Apple reported a profit of $7.5 billion for the fourth quarter of its fiscal year, down from $8.2 billion in the same quarter a year earlier. Revenue climbed to $37.5 billion for the quarter, up from $36 billion, beating analyst expectations for sales of $36.9 billion, according to Thomson Reuters. However, it was the third straight quarter of shrinking profit for the company.

For the current quarter, Apple said it expects revenue between $34 billion and $37 billion.

The decline in profit did not worry some analysts.

"We believe Apple's strong Q1/F14 guidance, after accounting for the incremental $900M in software deferral revenue, is consistent with our above-consensus estimate and expectations that a favorable iPhone and iPad mix shift should result in stronger holiday quarter ASPs [average selling prices] and margins versus consensus," said Canaccord Genuity analyst Michael Walkley.

The mobile sector also loomed as a big issue in the other attention-getting earnings announcement of the week, when Facebook Thursday said efforts to monetize its presence on mobile devices have been paying off.

Facebook said revenue was $2.02 billion, up 60 percent year over year. Sales from advertising amounted to $1.8 billion, up 66 percent from 2012's third quarter. Ads on mobile devices comprised about 49 percent of those sales. Net income for the quarter was $425 million, compared to a net loss of $59 million.

There has been enough positive news in tech earnings to help fuel share prices for the sector. The Nasdaq Computer Index of more than 130 tech companies on the exchange is up more than 22 percent for the year, with much of that growth coming over the last quarter.

 

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