Friday, 18 July 2008

News from global tech bellwethers

Last night several of the important global tech bellwethers reported quarterly results to 30th June 08.

Rather than repeating these results you can read the FT or Businessweek reports here:

- Nokia’s sales buck fears of slowdown
- IBM shrugs off global concerns
- Microsoft dips 5% despite sales increase
- Google Weathering the economy?

Essentially, so far as reported quarterly results are concerned, all the companies are roughly meeting expectations and all showed double-digit sales growth (albeit that a goodly proportion of this revenue growth came from the ‘positive’ effects of currency conversion because of a declining dollar).

It was the outlook statements which were studied even more closely than the actual results. Here there was more variation.

Nokia was decidedly upbeat; estimating an overall 10% increase in mobile devices in 2008 to c1.25billion and for Nokia to increase its share of this market from its current 40%.

IBM too was upbeat with strong sales in Europe and emerging markets like India. IBM has really moved to position itself well for any economic downturn with 50% of its revenues now coming from long-term services contracts. (Still short of Capita – but nobody’s perfect)

Microsoft, however, forecast Q1 revenues (to end Sept 08) of $14.7-$14.9 billion – somewhat short of analyst expectations. They also recorded costs rising somewhat faster than expected. This all spooked the market with Microsoft shares falling 6.5% in after-market trading.

Google also fell short of analyst expectations which caused an 8% drop in their share price. Readers might find that amazing given that Google reported a 42% increase in net revenues to $3.87billion! Analysts seemed spooked that Google had slowed its hirings. Was this because of fears of a consumer advertising slowdown?

So, as I said at the start of this piece, companies are really still reporting some rather fine results right now. It’s the future that is spooking people. As my friend George O’Connor at Panmure Gordon said in his note this morning “Although tech is a cyclical and ‘beta’ sector in the real economy it is late cycle. In the main, tech spending is sticky –with c80% being geared to keeping the existing fabric of companies intact (a flowery way for saying maintenance and support) as a consequence investors should prepare for bad news next year not this year – yes we will be downgrading earnings estimates – but not yet.”

This is a theme I have expounded before – for example in my IT resourcing – What’s up? article last week. 2008 expectations are probably pretty sound for most of the majors – it’s 2009 that worries the daylights out of me.

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