EARNINGS PREVIEW:US Software Cos May See Tech Spending Slowdown
January 13 2012 - 10:14AM
Dow Jones News
TAKING THE PULSE: Last month's disappointing quarterly results
from Oracle Corp. (ORCL), one of the technology industry's
bellwethers, have raised investor concerns that economic
uncertainty could be hurting enterprise spending on technology.
Oracle, the business-software giant, said delayed customer
purchases caused sales in its core software business to grow less
than expected in the second quarter and revenue in its newer
hardware division to decline more than it had feared. While the
global macroeconomic environment remains fragile, Oppenheimer in a
recent note said mobility, virtualization and cloud computing
software continue to drive growth.
Smaller player Progress Software Corp. (PRGS) earlier this month
reported its fiscal fourth-quarter earnings fell 45% on a decline
in software-licenses revenue, while Tibco Software Inc. (TIBX) saw
its earnings rise 38% on sales gains in both of its main
businesses.
COMPANIES TO WATCH:
International Business Machines Corp. (IBM) - reports Jan. 19
Wall Street Expectations: Analysts surveyed by Thomson Reuters
expect a profit of $4.62 a share on revenue of $29.74 billion,
ahead of year-earlier earnings of $4.18 a share and revenue of
$29.02 billion.
Key Issues: Big Blue has benefited from a push toward
higher-margin businesses, such as data-analysis services, and away
from crowded fields where companies compete mostly on price. While
that bet has been paying off, worries have emerged that the weak
global economy is having a negative impact on technology spending,
particularly by governments. IBM in October reported a
disappointing number of third-quarter signed service contracts, an
indication of future business, and a sequential decline in the
company's backlog, which measures the current value of work under
contract. BMO recently cut its fourth-quarter and calendar-year
2012 estimates for IBM, noting the company's software and systems
businesses likely had a tough quarter, and said it expects
acquisition-led software growth to slow.
Microsoft Corp. (MSFT) - reports Jan. 19
Wall Street Expectations: The industry giant is expected to
report a fiscal second-quarter profit of 76 cents a share on
revenue of $20.95 billion. A year ago, the company posted earnings
of 77 cents a share on revenue of $19.95 billion.
Key Issues: Microsoft executives, in comments made at the
Consumer Electronics Show earlier this week, warned that PC
shipments last quarter may be worse than analysts expect due to
supply disruptions from Thailand's flooding. Microsoft's Office
suite has continued to see strength with corporate customers in
recent quarters, but analysts will be watching for slowing sales of
its Windows 7 operating system in advance of the introduction of
its tablet-ready Windows 8 later this year. Chief Executive Steve
Ballmer noted in a CES keynote address that the company was
partnering with a broad range of PC and phone makers as Microsoft
looks to gain ground in the expanding consumer and mobile markets,
where it competes with Apple Inc. (AAPL) and Google Inc.
(GOOG).
VMware Inc. (VMW) - reports Jan. 23
Wall Street Expectations: Analysts forecast earnings of 60 cents
a share, while the company expects revenue between $1.03 billion
and $1.06 billion. A year earlier, VMware posted adjusted earnings
of 46 cents, which excluded stock compensation and other items, on
revenue of $835.7 million.
Key Issues: VMware dominates the market for virtualization
software, which allows users to run multiple computers' operations
on a single machine, the first step in cloud computing that
connects all kinds of computing devices. Customers that had turned
to the company for software to virtualize their information systems
are now considering buying VMware management tools as well, Chief
Executive Paul Maritz said in October. In a recent note, FBR said
the virtualization space continues to see healthy demand that
disproportionately benefits VMware as more enterprise customers
move toward the cloud. FBR also noted the company's fifth update to
its core vSphere virtualization software is gaining traction.
Citrix Systems Inc. (CTXS) - reporting date to be announced
Wall Street Expectations: Analysts forecast earnings of 76 cents
a share on revenue of $619 million, in line with the company's
expectations of earnings of 75 cents to 76 cents on revenue of $610
million to $620 million. Last year, Citrix posted earnings of 65
cents - excluding stock-based compensation and other impacts - and
revenue of $529.7 million.
Key Issues: Citrix, which improves efficiency by allowing
multiple systems to operate on one computer, saw its third-quarter
earnings rise 5% on across-the-board revenue growth, led by product
licenses and its online and technical services. Its
desktop-solutions business has seen its growth accelerate the last
few quarters due to the increasing importance of desktop
virtualization. Morgan Stanley in a recent note said the company
appears to show solid demand trends in its latest quarter, with
continued traction for XenDesktop and NetScaler services, larger
deals and steady performance in its online segment.
(The Thomson Reuters estimates and year-earlier figures may not
be comparable due to one-time items and other adjustments.)
-By Nathalie Tadena, Dow Jones Newswires; 212-416-3287;
nathalie.tadena@dowjones.com
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