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Wall Street Beat: Software a bright spot as tech results bring gloom

Marc Ferranti | July 22, 2013
Though software sales provided a ray of light in otherwise mixed results this week, gloom settled over the tech sector Friday in the wake of bellwether IT quarterly earnings reports.

In keeping with the global trend for a strong software market this year, Microsoft's application sales were strong. The Microsoft Business Division, which includes Office, had a revenue increase of 14 percent year over year, while sales for the Server & Tools unit increased 9 percent, boosted by demand for SQL Server and System Center.

In a departure from the good news for software, however, SAP reported some sales weakness. The business applications giant said Thursday that quarterly revenue increased 4 percent to €4 billion (US$5.3 billion) year over year, while profit rose 10 percent to €724 million. But while software and software-related service revenue rose 6 percent year on year to €3.3 billion overall, revenue from software alone dropped 7 percent to €982 million.

One problem for SAP is that while it is pushing its HANA in-memory database platform as a market leader for new types of analytics and data-processing, some customers may not be ready to embrace it yet, noted Forrester's Bartels.

On the components front, Intel reported a decline in earnings and revenue as the slumping PC market continued to hurt sales. Intel net earnings for the quarter plunged 29 percent from last year to US$2 billion, while revenue fell 5 percent to $12.8 billion.

The chip maker lowered its expectations for the year, forecasting sales to be flat, compared to its prior guidance for single-digit percentage growth.

Other tech giants reporting results this week included:

--Google, which said second-quarter net revenue, excluding payments to ad partners, was $11.1 billion, up year over year from $9.2 billion, while net income rose about 16 percent to $3.23 billion, or $9.56 a share. The results missed analyst expectations of $11.33 billion in revenue and $10.78 earnings per share. While the company is working mobile ads into its offerings, growth in its desktop advertising business is slowing.

--Yahoo, which reported a 46 percent increase in profit to $331 million. Revenue, however, was $1.14 billion, a 7 percent decline from last year. Though under CEO Marissa Mayer the company has tried to reinvent itself through acquisitions and has made efforts to control costs, it ultimately needs to boost sales to achieve real growth.

--Nokia, which despite reporting strong sales of its Lumia smartphones, suffered a 24 percent decline in revenue to €5.70 billion (US$7.48 billion). The company's net loss, however, was €278 million, smaller than the year-earlier loss of €1.53 billion.

 

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