Google, IBM, MS Offer Mixed SnapshotBy Reuters | Posted 07-18-2008
Google, IBM, MS Offer Mixed Snapshot
Google, IBM and Microsoft reported quarterly results on Thursday, giving investors a mixed snapshot of the health of the technology sector amid a slowing global economy.
Google posted a 35 percent rise in quarterly net profit but missed Wall Street's consensus forecast. IBM reported a higher quarterly profit that beat expectations. Microsoft also posted a rise in quarterly profit, but issued a forecast below Wall Street expectations.
Commentary on Google:
JEFFREY LINDSAY, ANALYST, SANFORD C. BERNSTEIN
"In this market, unless you blow results in this market, investors are going to be very skeptical. It looks as if they've beaten consensus on revenue. But the issue is the margins, they're a little disappointing. That's why earnings are low."
"Interest income looks low. That would come down for several reasons, including its DoubleClick acquisition."
"It looks like there has been some expense discipline. It could be that there's some weakness in the social networks deal but it hasn't been fully offset by the expense discipline."
"The economy's been hard on Google's network rather than Google's owned and operated business. That's why we're seeing lower gross margins. Overall, it could be that investors will be disappointed with earnings per share and in this market there will be a strong reaction."
COLIN GILLIS, ANALYST, CANACCORD ADAMS
"It's hard to love the numbers. There's the initial shock of this being the best company in the space and it just fell short. But when we wake up tomorrow, they're still taking market share and still the best company in the space. They're still innovating."
"People will be worried about the U.S advertising market continuing to roll over or decline. You saw it with ValueClick missing."
"The rebound party is over."
Commentary on IBM
Commentary on IBM:
ZACH ROSENSTOCK, ANALYST, WAYNE HUMMER WEALTH MANAGEMENT, WHICH HOLDS IBM SHARES IN ITS $1 BILLION PORTFOLIO
"Once again pretty impressive. They beat by about 16 cents this quarter after beating the prior two quarters. It's becoming a common thing for now. The revenues were up 13 percent, but largely foreign-exchange related, so you're seeing the change of the business model. They're focusing outside the U.S. to ride through the domestic downturn."
"I think people will be focusing on Google actually because they missed. Revenues from services and IBM's consulting side were strong, which bodes well because it's ahead of implementation. It's a positive that there's so much demand for product, but there will be more focus in the market on Google and Microsoft because they were worse than they expected. IBM had been expected to beat again."
KIM CAUGHEY, SENIOR ANALYST, FORT PITT CAPITAL GROUP
"They had a really strong quarter both in top and bottom lines. The software and services signings looked pretty strong. The company has been focusing on growing its new growth markets, which are small businesses and emerging geographic markets and that looked very strong. IBM has its toe in every tech water but it looks pretty good. In 2002, when we had a sudden downturn, Q2 was a bad quarter. But it doesn't look like IBM is going to have a very bad quarter. Companies are still buying technology and that's great."
"It's a little surprising the strength in the Systems Z mainframe. You think of mainframe being used most often in financial services companies so I'd like to hear who is buying these things since we all expect financial service companies will be pulling in on their spending."
KEITH WIRTZ, PRESIDENT AND CHIEF INVESTMENT OFFICER, FIFTH THIRD ASSET MANAGEMENT, WHICH HOLDS IBM SHARES IN ITS $22 BILLION PORTFOLIO
"They beat the number. I am very pleased about that....I take it as a good report."
"The Google number may cast a shadow on this stock."
"They are in a sweet spot as related to new product launches. We think in fact that the mainframe upgrade cycle is going to last for three or four more quarters."
"Things are just tracking really well for IBM now."
Commentary on Microsoft, Vista
Commentary on Microsoft:
PAT BECKER JR., CHIEF INVESTMENT OFFICER, BECKER CAPITAL MANAGEMENT, PORTLAND, OREGON, WHICH OWNS MICROSOFT
"I think you're seeing the quarter come in in line with expectations for the most part. Microsoft was in line to slightly better. With IBM, it was a very solid number. They came in at $1.98 versus estimates of 1.82. I think you're seeing a little more caution on guidance reflecting this uncertain environment."
KIM CAUGHEY, ANALYST, FORT PITT CAPITAL GROUP
"The top line was great. I'm trying to figure out where the penny went."
"The thing I'm extremely bullish about is their forecast for the future for top line growth. This is a company that brings in $60 billion dollars in revenue in a year and for it to constantly say that it's going to do more and better year after year that's always a good sign."
"The other thing is Microsoft generally underpromises and overdelivers. So I think that it's bullish for technology that they see demand out there."
ANDY MIEDLER, ANALYST, EDWARD JONES
"Their core business did okay. However we were a little disappointed in the traction we're seeing out of Microsoft's Internet advertisement business."
"The guidance was a little light....We would expect the technology area to be impacted by what's going on in the economy. Microsoft narrowing their outlook a bit for the coming year, we think it's reasonable given the challenging economic conditions."
"I think the big thing is while Microsoft's core businesses of Windows, Office and server did well, investors are really keying in on Internet advertisement given all the Yahoo drama over the last few months."
"In the fourth quarter, results in this unit were a bit ahead of what we were expecting so that looked okay. However, we are a bit cautious given if companies are going to cut back on spending, upgrading to Vista is one of those areas we can see them being cautious on."