Wall Street Beat: Transition to mobile, cloud hits tech earnings

Tech bellwethers weigh in with second-quarter sales

By , IDG News Service |  IT Management

With Google, IBM, SAP, Intel and other tech titans reporting earnings this week, the focus is again on mobile and cloud technology. The general trend appears to be that the further a tech vendor has moved away from its legacy desktop-oriented products, the better its earnings are.

IBM has launched ambitious cloud and mobile initiatives -- but the resulting products are not quite fully baked. IBM officials themselves acknowledge as much, with IBM CEO Ginni Rometty talking about "positioning ourselves for growth over the long term" in the company's earnings release Thursday.

Earlier this year, IBM announced a global competition to encourage developers to create mobile consumer and business apps powered by its Watson supercomputer platform. Just this week, IBM and Apple said they are teaming up to create business apps for Apple's mobile phones and tablets.

But such projects have a ways to go before they reach fruition. Meanwhile, IBM revenue growth is flagging. Its second-quarter revenue was US$24.4 billion, down 2 percent year over year. Profit jumped 28 percent year over year, to $4.1 billion, but that was mainly because it compares to a quarter when net earnings were unusually low due to a billion-dollar charge the company took for workforce rebalancing.

Though both revenue and profit beat analyst forecasts, at first blush investors appeared disappointed, driving down IBM's share price overnight. IBM shares gained back ground Friday but in early afternoon trading were still down by $0.60 at $191.89.

SAP seems to be riding the transition to cloud while incrementally boosting revenue. The company Thursday reported that, though software revenue continued to decline, cloud-based sales rose.

The maker of ERP (enterprise-resource-planning) software reported that revenue rose by 2 percent year over year to €4.2 billion (US$5.7 billion) in the quarter. SAP's cloud subscription and support revenue was €241 million in the quarter, up 52 percent. Due to provisions for its patent dispute with software maker Versata, however, its net profit dropped year on year by 23 percent to €556 million.

As usual, Google was the earnings star of the week, reporting Thursday that its core advertising business fueled a 22 percent year-over-year increase in sales, to $15.96 billion. Profit was $3.42 billion, up almost 6 percent year over year.

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