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October 18, 2012

Financial roundup: tech giants cause for concern

CBR looks at the latest results for a couple of technology's biggest names

By Cbr Rolling Blog

It has been quiet on the financial side of things recently but before the rush over the next week, when the likes of Microsoft, Apple, Google, VMware and Yahoo release their quarterly results, we have a couple of companies to look at.

We’ll start with chip maker Intel, who revealed a 5.4% dip in revenue for its third quarter, from $14.2bn to $13.5bn. The company has been hit hard by the fall in PC sales and its mobile offering is not yet strong enough to make up for this shortfall. Profit at Intel also fell, from $3.4bn this quarter last year to $2.9bn this time.

But the company is also struggling in another area; the data centre. Over recent quarters strong sales of servers has helped Intel offset falling PC sales, but this quarter revenue disappointed as enterprises slowed down on server spend. Although revenue from data centres was up 6% year over year, it was down 5% on the prior quarter.

The company is pinning a lot of its hopes on Microsoft’s upcoming Windows 8 operating system, which is scheduled for release at the end of October. Intel hopes the release of Windows 8 will result in a boost in PC sales, particularly in the run up to Christmas.

Another area where Intel has invested heavily is Ultrabooks, thin laptops with touch screens that run Windows 8. However sales of those devices have also been sluggish, leading to one analyst company slashing its sales forecast by 50%.

IHS iSuppli cut its predictions from 22 million shipments by the end of 2012 to just 10.3 million. The analyst house said high prices and people preferring tablets were the main reason for the poor sales.

Intel CEO Paul Otellini however said he was satisfied with Ultrabook sales. "The world of computing is in the midst of a period of breakthrough innovation and creativity," he said. "As we look to the fourth quarter, we’re pleased with the continued progress in Ultrabooks and phones and excited about the range of Intel-based tablets coming to market."

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Speaking to Reuters, Chief Financial Officer Stacy Smith also defended Intel’s performance. "I absolutely expect growth in the PC segment, and I firmly believe that the level of innovation we’re seeing in Ultrabooks is going to be one of the catalysts. I’m not going to put a number out there -but I expect it to grow."

Over at IBM the figures were similarly disappointing. Big Blue recorded a negative currency impact of $1bn, which dragged third quarter revenue down 5.4% to $24.7bn.

This was down on analyst expectations for the quarter, which sent shared tumbling in after-hours trading. The company also said a couple of big deals it had expected to complete during the quarter slipped.

Net income dipped slightly to $3.82bn from $3.84bn a year ago. That figure was natively impacted by a $160m charge related to pension payments owed to UK workers.

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