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.”

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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."

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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."

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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

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