EARNINGS PREVIEW: US Software Firms Expected To Show Growth

TAKING THE PULSE: Worldwide enterprise software revenue is expected to surpass $232 billion this year, a 4.5% increase from the prior year, according to Gartner Inc.'s (IT) latest forecast. The industry researcher said aging systems, as well as greater demand for security and aligning software with business requirements, are influencing end users to increase their spending. Emerging markets, which were less affected by the latest economic downturn, are expected to invest heavily in enterprise software in the next few years, Gartner said.

Meanwhile, smaller players Tibco Software Inc. (TIBX), Progress Software Corp. (PRGS) and Lawson Software Inc. (LWSN) have in recent weeks reported sales and margin growth in their most recent quarters. Business-software giant Oracle Corp. (ORCL) also notched an impressive increase, as it benefited from new revenue from its Sun Microsystems acquisition, as well as strong demand for software licenses.

COMPANIES TO WATCH:

International Business Machines Corp. (IBM) - reports Oct. 18

Wall Street Expectations: Analysts polled by Thomson Reuters projected a profit of $2.75 a share on revenue of $24.12 billion. A year earlier, IBM reported $2.40 and $23.6 billion, respectively.

Key Issues: The technology giant has made good on its plans to get more aggressive about acquisitions. It has made 14 deals this year, including its most recent move to buy Blade Network Technologies, a maker of Ethernet switches. IBM has reported an increase in software and services revenue for three consecutive quarters, as it benefits from heavy investments in emerging countries, as well as key growth areas, such as business analytics.

VMware Inc. (VMW) - reports Oct. 18

Wall Street Expectations: The world's biggest computer-virtualization software company is seen earning 35 cents on revenue of $697 million. A year ago, VMware posted a profit of 9 cents, or 24 cents excluding stock-compensation and other impacts, on revenue of $490 million.

Key Issues: VMware, majority-owned by EMC Corp. (EMC), is expected to report its third consecutive quarter of profit improvement as sales continue to benefit from strong demand of virtualization software. VMware in August moved to acquire two venture-based startups that it said will help advance its role in cloud computing, while last month, the Wall Street Journal reported VMware is pursuing Novell Inc.'s (NOVL) SUSE Linex operating system business.

Citrix Systems Inc. (CTXS) - reports Oct. 21

Wall Street Expectations: The company, which improves efficiency by allowing multiple systems to operate on one computer, is projected to post a profit of 49 cents on revenue of $458 million. Prior-year earnings were 29 cents, or 43 cents excluding write-downs and other impacts, on revenue of $401 million.

Key Issues: Citrix, VMware's key competitor, earlier this month announced a new version of XenServer with new storage and networking innovations. The product continues to gain market share, fueled by a free version. Meanwhile, Citrix in August moved to acquire VMLogix Inc., which makes software that helps customers manage both private and public cloud computing, amid a backdrop of dealmaking in the software sector.

Microsoft Corp. (MSFT) - reports Oct. 28

Wall Street Expectations: The industry giant is slate to report earnings of 55 cents on revenue of $15.83 billion, up from 40 cents and $12.92 billion, respectively.

Key Issues: Although Microsoft continues to benefit from strong demand of its two biggest products--Windows and Office--investors are skeptical about the software giant's push into newer consumer markets, namely Internet search and mobile phones, where rivals Google Inc. (GOOG) and Apple Inc. (AAPL) are thriving. On Monday, it revealed a line-up of smartphones using its revamped Windows Phone 7 mobile operating system.

(The Thomson Reuters financial estimates and year-earlier figures may not be comparable due to one-time items and other adjustments)

-By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com

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