April 19, 2013, 3:35 PM — Some of the biggest names in IT including IBM, Microsoft, Google and Intel reported quarterly earnings this week, revealing a picture of the tech sector that, while not as gloomy as had been feared, is nevertheless mixed.
The earnings reports showed that while hardware suffered in the first quarter, software sales showed resiliency. The news was enough to send the Nasdaq tech index up 0.92 percent to 1521.92 in Friday afternoon trading. Not all vendors enjoyed shareholder confidence, however. For example, while Microsoft shares were up US$1 to $29.79 and Google was up $34.77 to $800.47, IBM declined $16.76 to $190.41 and AMD dropped $0.10 to $2.41.
Market surveys in recent weeks showed a precipitous drop in the first quarter for PC sales and raised concerns that tech bellwethers -- especially those with exposure to the consumer hardware market -- would be reporting dismal sales.
Microsoft's earnings report, however, showed gains in all of the company's business units. For the quarter ended March 31, Microsoft reported revenue of US$20.5 billion, up 18 percent year over year, while profit rose 19 percent to $6.06 billion.
Last week, IDC said the 13.9 percent year-over-year drop in first-quarter PC sales was the worst decline it has seen since it started tracking the PC market in 1994, laying some of the blame on Windows. Windows 8, which was launched in October, offers a touchscreen-based interface that is a departure for the OS and made the software less attractive to users, IDC said.
Microsoft's Windows Division, however, garnered quarterly revenue of $5.7 billion, up 23 percent. Excluding revenue recognized from a prior upgrade offer, revenue was flat year over year, but in any case the Windows landscape for the quarter was hardly the disaster that some industry watchers feared.
The news could bode well for other sectors in tech. "Software is a leading indicator," noted Forrester chief economist Andrew Bartels. Noting that Microsoft's Business Division, which includes Office, increased revenue 8 percent to $6.32 billion, Bartels said business spending on software can translate into more spending on related services several quarters down the road as companies implement related projects.
SAP had good news for the software market Friday morning, announcing its 13th consecutive quarter of double-digit growth in software and software-related services. The business applications vendor said revenue increased 7 percent to €3.6 billion (US$4.6 billion), while net earnings jumped 17 percent to €520 million.