Sunday, December 30, 2012

Android Dominates China Smartphone Market

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Android's share of the Chinese smartphone market ended the third quarter at 90 percent. According to Analysys International, Android's share is up from 83 percent a quarter prior and 58 percent a year ago.

With the Chinese market now accounting for a quarter of global smartphone shipments, Android's dominance there is driving its widening lead in global smartphone platform market share. In China, Android's gain has mostly come at the expense of Symbian, Nokia's antiquated platform that will eventually disappear as Nokia shifts its product offerings on to Windows Phone.

Interestingly, despite its dominance, Google only offers limited support for Google Play in China and Android apps are usually downloaded in third-party app markets.

Apple, meanwhile, has never really gained traction after a weak market entry on only one of the country's major providers. The iPhone 5 will be available on two carriers, but as of now will not be distributed by the largest carrier, China Mobile. Additionally, while many Chinese consumers may fawn over iPhones, they are simply out of reach financially for a substantial part of the market.

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Sunday, November 11, 2012

Amazon Earnings Review: Coming Apart at the Seams

Amazon reported QE September 2012 financial results on October 25

Last quarter I said that Amazon's financial results were "depressing", even though CEO Jeff Bezos says the spending is for long-term upside and glory. This quarter was even worse as the downtrend accelerated. The prior quarter was a meager net income of $7 million (on almost $13 billion of sales and an earnings per share of a mere +0.01) and that has evaporated. Now there is a current quarter net loss of -$274 million (on almost $14 billion of sales and a resulting loss per share of -$0.60).

Some of this financial performance destruction was, "The third quarter 2012 includes a loss of $169 million, or $0.37 per diluted share, related to our equity-method share of the losses reported by LivingSocial, primarily attributable to its impairment charge of certain assets, including goodwill". That would result in an Amazon core business loss per share of -$0.23 which is still dismal.

The next quarter, the Holiday QE December 2012, would normally be the annual financial performance peak, first for revenues and then, in theory, for net income and earnings per share. Not so. Management's outlook is $20+ billion in sales for the QE December 2012, but the operating loss is projected to be deeper, dropping to a worst-case scenario operating loss of -$490 million. Hence net income will sink accordingly, yet again.

Sales continue trending upwards and year over year growth has been consistent. Not so with earnings per share. For 7 consecutive quarters, year over year EPS performance has been negative, meaning the prior year's earnings per share was not matched or exceeded. So far, no benefit for the shareholders on the outside. Ouch.

Outlook QE December 2012:
* Net sales are expected to be between $20.25 billion and $22.75 billion, or to grow between 16% and 31% compared with fourth quarter 2011.
* Operating income (loss) is expected to be between $(490) million and $310 million, compared with $260 million in the prior year period.
* This guidance includes approximately $290 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions, investments or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.

"Our approach is to work hard to charge less. Sell devices near breakeven and you can pack a lot of sophisticated hardware into a very low price point,” said Jeff Bezos, founder and CEO of “And our approach is working – the $199 Kindle Fire HD is the #1 bestselling product across Amazon worldwide. Incredibly, this is true even as measured by unit sales. The next two bestselling products worldwide are our Kindle Paperwhite and our $69 Kindle. We’re selling more of each of these devices than the #4 bestselling product, book three of the Fifty Shades of Grey series. And we haven’t even started shipping our best tablet – the $299 Kindle Fire HD 8.9” ships November 20.”


VMware Earnings Review: Performance Sputters Again

VMware reported QE September 2012 financial results on October 23

As noted last quarter, new CEO Pat Gelsinger has a financial performance downtrend to contend with. Gross margin is stable. The performance slowdown is the result of increasing operating expenses and therefore a decreasing operating margin (now 17% down from a peak of just over 20%). Some of this increase in operating expenses is most likely the result of acquisitions. Whether this is a short-term trend or a change in the long-term business model remains to be seen.

QE December 2012 guidance for total revenues is an improved +19% to +22% QoQ and +21% to +22% YoY. However, the 12-quarter YoY average has been +32%. Full 2012 guidance for total revenues is +21% to +22% YoY.

VMware also announced a new CFO, "Jonathan Chadwick, 46, brings deep industry and business leadership experience to VMware. Most recently, he served as corporate vice president of Microsoft and CFO of Skype, following roles as EVP and CFO of McAfee and in a variety of finance leadership positions in over a decade at Cisco Systems. Chadwick will be responsible for leading VMware’s global finance organization and will report to Gelsinger".

Total revenues continue growing solidly year over year and is now +20.7%. However, the trend is downwards and the growth rate has decreased 5 consecutive quarters and is the lowest since the QE 12-31-09 (+18.2%).

This financial performance downtrend has trickled down to net margin and therefore GAAP earnings per share, which has decreased year over year for 2 consecutive quarters, and is now -12.2%. These are the only 2 GAAP EPS YoY decreases since the QE 12-31-09.

“Third quarter results reinforce VMware’s leadership and momentum as cloud emerges as the de facto IT infrastructure standard,” said Pat Gelsinger, chief executive officer, VMware. “Our Software Defined Data Center platform gives customers a clear path to the cloud, and the recently announced VMware vCloud® Suite of virtualized compute, storage, networking and management capabilities demonstrates our unique ability to deliver proven solutions that speed this journey.”

“We delivered a solid quarter despite tough macroeconomic conditions,” said Carl Eschenbach, chief operating officer and co-president, VMware. “The quarter went as expected and we achieved record quarterly results for total revenue and non-GAAP operating income. Fourth quarter revenues are expected to be in the range of $1.26 and $1.29 billion. Annual 2012 revenues are expected to be in the range of $4.572 and $4.602 billion, an increase of 21.4% to 22.2% from 2011. Annual license revenues are expected to grow between 12.8% and 13.8%.”


Tuesday, October 23, 2012

Microsoft Earnings Review: Decline of an Empire

Microsoft reported QE September 2012 financial results on October 18

Straight up, CEO Steve Ballmer is the conservator of the Gates Family fortune and legacy while Bill runs around with Warren Buffett and Melinda gives vaccines to kids in Africa. You think the late Steve Jobs dreamed of Ballmer replacing him at Apple? You think the Big Tech companies such as Google, IBM, Qualcomm, et al. wish they could lure him away to lead them onwards and upwards forevermore?

Of course not, Ballmer's job is to sit on an unbelievable pile of cash and try not to screw up too much, of which he is capable of (see prior quarter EPS Suffers From $6.2 Billion Bungled Vision!).

That pile of cash now consists of liquid assets (cash, cash equivalents, marketable securities) that have increased to $66+ billion. Add noncurrent equity and other investments and the reserves are $76+ billion!

The problem is Steve Ballmer has no idea what to do with all this accumulated glory as he is hopelessly trapped inside the box as the world leaves the Mighty Microsoft behind. He is the old vaudevillian whose venues and crowds become smaller and smaller until ultimately only obscure county fairs and then finally ladies social clubs are his only gigs.

How has Microsoft been doing? Let's appreciate the downtrend and ineffectiveness of Microsoft management to lead stay at the leading edge of technology.

What's going on here? Could margins be slipping as the same old tricks lose effectiveness?

Year over year growth is slipping away... However, this next quarter, Holiday Q4, should be strong, even for Microsoft, and we might see a year over year increase at top line and bottom line. If not, the castle gates have been breached. Q1 and Q2 2013 could be ugly and confirm the hastening decline of the empire.

Windows new era magic isn't working yet, maybe in Q4.

We now arrive at the crowd of irate MSFT stockholders yelling about Ballmer's lack of stewardship and maximizing shareholder wealth.

Our old vaudevillian speaks and brings out the hat and cane:

"The launch of Windows 8 is the beginning of a new era at Microsoft,” said Steve Ballmer, chief executive officer at Microsoft. “Investments we’ve made over a number of years are now coming together to create a future of exceptional devices and services, with tremendous opportunity for our customers, developers, and partners.”


Saturday, October 20, 2012

IBM Earnings Review: Performance Slows

IBM reported QE September 2012 financial results on October 16

Financial performance slowed from the prior quarter and the prior year. The next quarter, Q4, is the annual cyclical high so ground hopefully will be regained then. Gross, operating, and net margins held and should be stronger next quarter. Liquidity and capital are adequate. Total assets ($115.8 billion) place IBM in the Big Tech $100 Billion Assets Club along with Apple, HP, and Microsoft.

Q4 2011 financial performance was stellar and expectations for this next Q4 2012 are high. New CEO Ginni Rometty needs to exceed to maintain the momentum. We await.

IBM lowered guidance on the full-year 2012 GAAP EPS to $14.29+ from $14.40+ (previously had been $14.27+ and earlier was $14.16+). Prior year 2011 GAAP EPS was $$13.12. The full-year 2012 Non-GAAP outlook remains at $15.10+ (earlier was $15.00+ and even earlier was $14.85+). Prior year 2011 Non-GAAP EPS was $13.49.

"In the third quarter, we continued to drive margin, profit and earnings growth through our focus on higher-value businesses, strategic growth initiatives and productivity," said Ginni Rometty, IBM chairman, president and chief executive officer.

"Looking ahead, we see good opportunity with a strong product lineup heading into this quarter and annuity businesses that provide a solid base of revenue, profit and cash. We are reiterating our full-year 2012 operating earnings per share expectation of at least $15.10."


Intel Earnings Review: Gradual Long-Term Decline Continues

Intel reported QE September 2012 financial results on October 16

The song remains the same at Intel: muddling through as revenue growth stalls. Financial performance is slowing long-term for both revenues and earnings per share. Gross, operating, and net margins have been near stable, but peaked in 2010 and may decrease more. Liquidity and capital are adequate. CEO Paul Otellini continues to promise better days ahead through innovation but this hope has remained beyond his grasp as technology races away from the Microsoft / Dell / Intel desktop days of yore.

Intel Outlook

Q4 2012 (GAAP, unless otherwise stated)
* Revenue: $13.6 billion, plus or minus $500 million.
* Gross margin percentage: 57 percent and 58 percent Non-GAAP (excluding amortization of acquisition related intangibles), both plus or minus a couple of percentage points.

"Our third-quarter results reflected a continuing tough economic environment," said Paul Otellini, Intel president and CEO. "The world of computing is in the midst of a period of breakthrough innovation and creativity. 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."


Monday, October 8, 2012

HP Turnaround Strategy and Outlook Announced

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HP Details Turnaround Strategy, Provides 2013 Outlook

Oct 03, 2012 (Marketwire via COMTEX) --At HP's (NYSE: HPQ) annual Securities Analyst Meeting, being held today in San Francisco, the company's leadership is mapping out strategic priorities for the future and providing a detailed multiyear roadmap to turn the company around.

During her keynote, HP's president and chief executive officer Meg Whitman outlined progress made over the past year to stabilize the business and lay the foundation for a multiyear turnaround. The operating and organizational models have been integrated, centralized and streamlined, and a talented executive team is in place to execute the strategy.

The company is positioned to extend its leadership into the major trends driving IT investment -- cloud computing, information optimization and data security. In May, HP initiated a multi year restructuring designed to realign its cost structure and create investment capacity to drive innovation against its strategic priorities, strengthen market leadership and rebuild its balance sheet while returning capital to shareholders. Despite the challenging environment, the company has maintained research and development (R&D) spending, along with a steady focus on preserving the long-term health of the business. The company is on track to deliver on its savings targets and complete the restructuring by the end of fiscal 2014.

Whitman walked through a multiyear roadmap to turn the company around. By 2016, she expects the company's revenues to be growing in line with gross domestic product (GDP), with operating profit growing faster than revenues, industry-leading margins and disciplined capital allocation.

"HP has a powerful set of assets, a culture of engineering innovation and a trusted brand," said Whitman. "Now, we have to focus on bringing our incredible assets together to deliver for our customers, employees and shareholders."

Fiscal 2013 Outlook Cathie Lesjak, HP's chief financial officer, provided a financial outlook for the company in fiscal 2013. The company estimates non-GAAP diluted earnings per share for fiscal 2013 to be in the range of $3.40 to $3.60 and GAAP diluted EPS for fiscal 2013 to be in the range of $2.10 to $2.30. Fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.30 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges. Lesjak also articulated the company's long-term commitment to financial discipline and reducing net debt.

Read more

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Largest USA Tech Companies Earnings Soften: Apple Dominates, HP Plunges

This is the technology sector reported financial performance going into the October earnings season.

Quarterly Net Income

The Largest USA Tech Companies have reported quarterly aggregate net income of $14.8 billion, which is lower than the prior quarter $35.6 billion. This is a sequential QoQ decrease of -$20.8 billion and -58%! What happened? HP reported an epic quarterly net loss of -$8.9 billion, which offset the Apple quarterly net income of +$8.8 billion. Microsoft reported a rare quarterly net loss of -$492 million. Eight of the eleven companies reviewed reported a QoQ decrease in net income.

A net decrease is not unusual or unexpected as summer is typically a slower financial performance on an annual cyclical basis for the tech sector. But the huge HP and extraordinary Microsoft net losses created a plunge. The only three sequential QoQ increases were IBM (+$816 million) and Intel (+$89 million) and EMC (+$63 million).

For the latest quarters reported, Apple continues dominating with an incredible $8.82 billion quarterly net income. Second was IBM at $3.88 billion, third was Intel at $2.83 billion, and fourth was Google with $2.79 billion. Apple earned more than #2 IBM and #3 Intel combined.

The rest of the pack follows with #5 Oracle at $2.03 billion, #6 Cisco at $1.92 billion, #7 Qualcomm at $1.02 billion rounding out the Billion Dollar Club. Trailing are #8 EMC at $689 million and #9 Amazon at a mere $7 million. Further behind are #10 Microsoft at a dismal net loss of -$492 million and #11 HP with the aforementioned epic loss of -$8.86 billion. Apple comprises approximately 60% of the total quarterly net income of the 10 tech companies listed!

Return on Assets

The Largest USA Tech Companies have reported an average return on assets of +12.29%, a multi-quarter low and -1.68% decrease from the prior quarter. Seven of the eleven companies reviewed reported decreases. The largest sequential QoQ decreases were HP (-8.564%), Microsoft (-6.42%), and Apple (-2.08%). The only significant sequential QoQ increase was Cisco (+0.65).

For the latest quarters reported, Best of Breed goes to Apple with a commanding and incredible lead of at +29.70% ROA. Apple is distantly followed by Intel (+17.61%), Qualcomm (+15.26%), and Google (+15.02%), and Microsoft (+14.95%). Next are #6 IBM (+14.30%), and #7 Oracle (+13.53%).

Significantly lagging the field are #8 Cisco at +9.01% and #9 EMC at +8.42%. Amazon is #10 and a much lower +1.82%. Finally, HP is last and #11 at a negative -4.44%.

I have included Amazon because of the Kindle Fire, streaming, cloud services, and the resulting competition with others listed.

Status Updated through Oracle quarterly financial results reported 9-20-12
Next reports: October earnings season


Sunday, September 30, 2012

Big Tech Assets Rise, Apple Reaches Record $163 Billion

This is the technology sector reported financial position going into the October earnings season.

Total Assets

The Largest USA Tech Companies have reported all-time high aggregate total assets of $940 billion. This is a net increase of +$14 billion and +1.6% from the prior quarter. Apple led the way, and continues pulling away, with another incredible +$11.9 billion quarterly increase, followed by Google (+$8.9 billion), and Microsoft (+$3.3 billion). A huge decrease was reported by HP (-$10.1 billion), followed by Oracle (-$1.8 billion), and IBM (-$1.5 billion).

The $100 Billion Club: For the latest quarter reported, Apple continues #1 and largest at $162.9 billion. Microsoft moved up to #2 at $121.3 billion while HP slipped to third at $117.6 billion. IBM continues at #4 with $113.8 billion. Cisco is #5 at $91.8 billion.

The next group is #6 Google at $86.1 billion, #7 Oracle ($76.6 billion), and #8 Intel ($72.4 billion). Qualcomm and EMC are a more distance #9 and #10 at $42.4 billion and $35.0 billion, respectively. Amazon is last and #11 at $21.0 billion. I have included Amazon because of the Kindle Fire, streaming, cloud services, and the resulting competition with others listed.

Capital Ratio

The Largest USA Tech Companies have reported an average capital to assets ratio of 54.53%, a slight decrease of -0.85% from the prior quarter. Six of the eleven companies reviewed reported increases, led by Intel (+2.3%) and followed by EMC (+0.85%) and Oracle (+0.84%). Google and Microsoft reported the largest decreases at -4.79% and -3.46%, respectively.

For the latest quarters reported, Qualcomm (77%) continues leading Google (75%) to have the strongest capital position. Apple is #3 at 69%, followed closely by Intel at 67%. Next are EMCCiscoOracle, and Microsoft at 63%, 57%, 56%, and 55%, respectively. Amazon is 9th at 36%, followed by HP (27%) and finally IBM (18%) is last and #11.

Updated through Oracle quarterly financial results reported 9-20-12
Next reports: October earnings season

Earnings Reviews


Friday, September 28, 2012

Wednesday, September 26, 2012

Tuesday, September 25, 2012

Oracle Earnings Review: EPS Strengthens, Revenues Weaken, Outlook Stable

Oracle reported QE August 2012 financial results on September 20

Due to Oracle's very cyclical quarterly results, the year over year (YoY) results are the way of keeping score. The score is mixed from this latest quarterly report.

The GAAP earnings per share of $0.41 was an encouraging +13.89% YoY, compared to +11.29% YoY last quarter, which was a 9-quarter low. The downtrend was reversed. The problem is the GAAP EPS outlook for next QE November 2012 of $0.45 to $0.49 or +4.65% YoY to +13.95% YoY. The downtrend will either redevelop or Oracle treads water in a best case scenario. However, the Fed's quantitative easing might just save the day when earnings are reported in December on a weaker US Dollar.

Total revenues were a disappointment, down -2.30% YoY and projected for QE November 2012 at +0% to +5% QoQ.

Strengthening US Dollar: Oracle should benefit next quarter from the Federal Reserve's infinite quantitative easing. For the QE August 2012, "Without the impact of the US dollar strengthening compared to foreign currencies, Oracle’s reported Q1 GAAP earnings per share would have been $0.03 higher at $0.44, up 24%, and Q1 non-GAAP earnings per share would have been $0.03 higher at $0.56, up 17%. Both GAAP and non-GAAP total revenues also would have been up 3%, GAAP new software licenses and cloud software subscriptions revenues would have been up 10%, non-GAAP new software licenses and cloud software subscriptions revenues would have been up 11% and both GAAP and non-GAAP hardware systems products revenues would have been down 21%."

The long-term trend is clearly upwards as evidenced by the GAAP EPS chart below. However, the strength of the uptrend is weakening. The biggest performance concern is the flat to decreasing YoY growth rates in total revenues and perhaps a resumption of slowing YoY growth rates in earnings per share.

The biggest financial position negative has been the debt. This is now 19% of total assets and at a multi-year low, down from a peak of 26% for the QE August 2010. Financial position continues acceptable with adequate capital, moderate debt, strong liquidity, and an increasing return on assets. Stock repurchasing and dividends are a plus.

GAAP Quarterly Financial Result, QoQ Change, YoY Change
Total Assets: $76.56 billion, -2%, +4%
Revenues: $8.18 billion, -25%, -2%
Net Income: $2.03 billion, -41%, +11%
Earnings per Share: $0.41, -41%, +14%
Cash Flow per Share $1.15
1-Year Return on Assets +13.53%

Oracle Outlook QE November 2012
GAAP and Non-GAAP Total Revenues +0% to +4%
QoQ Non-GAAP EPS of $0.59 to $0.63 = $0.61 avg = +15% QoQ, +13% YoY
GAAP EPS $0.45 to $0.49 = $0.47 avg = +15% QoQ, +9% YoY

Oracle Cloud: "A little more than a week from now we will announce lots of enhancements to the Oracle Cloud," said Oracle CEO, Larry Ellison. "There are more CRM, ERP and HCM applications as a service, and more Oracle database, Java and social network platform services. Our new infrastructure as a service is available in the Oracle Cloud and as a private cloud in our customers’ data center, with the nique ability to move applications and services back and forth between the two. Join us at Oracle OpenWorld for all the details."


Cramer: Apple vs. Google

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Cramer: Apple vs. Google

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Tuesday, September 18, 2012

Top 5 Laptops Under $600

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Dell Inspiron 17R

CNET Top 5 : Best Laptops Under $600

Don't call them netbooks. These inexpensive computers deliver the features of full-fledged laptops costing twice as much.

5) Lenovo ThinkPad X130e
4) Acer Aspire V5-171-6867
3) Sony Vaio E Series SVE11113FXW
2) HP Sleekbook 6
1) Dell Inspiron 17R

Overall Best Laptop, Any Price: Apple MacBook Pro

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Sunday, September 9, 2012

Big Tech Profits Soften: HP, Microsoft, Amazon Plunge!

Net Income: Quarter over Quarter Change

The Largest USA Tech Companies reported softening profits from the prior quarter, which is not unusual this time of year on an annual cyclical basis. Only 3 of the 10 companies reviewed reported sequential quarterly increases (Oracle, IBM, Intel).

First, HP is not included in the chart below. HP, which is among the walking wounded, reported a disastrous quarter and a chart-busting -656% decrease in net income QoQ. HP reported a net loss of -$8.86 billion for their latest quarter, compared to net income of +$1.59 billion in the prior quarter. Including HP skews the chart and obscures the data.

Reporting net income increases quarter over quarter were Oracle (+38%), IBM (+27%), and Intel (+3%). Reporting a decrease in net income from the prior quarter were Google (-4%), Cisco (-11%), Apple (-24%), and Qualcomm (-46%). The Big Losers were Amazon (-95%), Microsoft (-110%), and the aforementioned HP (-656%). The second calendar quarter is typically slower and a quarterly drop for many tech companies in total revenues, net income, and earnings per share.

Net Income: Year over Year Change

The Largest USA Tech Companies reported more positive results from the prior year, compared to the prior quarter. 6 of the 10 companies reviewed reported YoY increases. Cisco (+56%) and Apple (+21%) led the way, followed by Qualcomm (+17%), Google (+11%),  Oracle (+8%), and IBM (+6%). The remainder lost ground and some lost huge territory. Intel (-4%), Amazon (-96%), Microsoft (-108%), and HP (-560%) reported decreases year over year.

HP is not included in the chart below. Including HP skews the chart and obscures the data.

Updated through HP quarterly financial results reported 8-22-12
Next reporting: Oracle in September

Big Tech Assets Rise, Apple Reaches Record $163 Billion

Largest USA Tech Companies Earnings Plunge, But Apple Still Dominates


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