Unusual Words From Microsoft As Company Feels Economic Pinch

January 22, 2009

Eternally upbeat Microsoft had some downbeat thoughts Thursday as it reported a $700 million shortfall in second-quarter sales.

Unprecedented economic dislocation, Steve Ballmer says

Unprecedented economic dislocation, Steve Ballmer says

An 8 percent decline in its Windows business was the biggest culprit in the turndown. Purchases of traditional PCs fell 10 percent and strong netbook sales failed to compensate.

Netbook, portable computers that sell for $500 or less, take a lower priced version of Windows or use a Windows alternative operating system.

“We’re not used to down markets,” said CEO Steve Ballmer on a conference call. The company’s revenue was up 2 percent to $16.6 billion, but missed Wall Street expectations, as did its earnings per share of 47 cents before items.

Even consumer sales of Office felt the pain – down 23 percent in the quarter.

“The global economy continued to deteriorate beyond our expectations, particularly in the month of December,” said CFO Chris Liddell.

Ballmer said he does not expecting a quick turnaround in the economy or the company’s business.

“I’m not expecting a bounce,” he said on a conference call. “Our model is not for a quick rebound.”

Conditions could be soft for one or two years, he said. “I don’t know. This economic dislocation is unprecedented.”

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Posted by Mark Boslet

Microsoft Claim Of 5,000 Layoffs Is Not The Whole Story

January 22, 2009

Microsoft said this morning it would cut 5,000 jobs as it slashes costs to compensate for slower revenue growth.

The positions will come from marketing, sales, R&D, finance, legal, human relations and IT at the 91,000-employee company.  The jobs of 1,400 people will be eliminated on Thursday with the remainder disappearing during the next 18 months.

But that isn’t the whole story. The software giant plans to cut the cord to even more outside contractors – perhaps 15 percent of all it employs.

And it intends to hire several thousand people to fill new positions in businesses where it sees attractive opportunities, such as online search.

That means the total cuts to Microsoft’s staff will be more like 2,000 to 3,000 jobs, said CEO Steve Ballmer.

“We are in the midst of a once in a lifetime set of economic conditions,” said CEO Steve Ballmer on a conference call discussing the company’s disappointing second-quarter results. “The economic is resetting to a lower level of business and consumer spending.”

So at Microsoft, “we’re really putting the brakes on,” Ballmer said.

But the company is focused as well on gaining market share in markets it sees as ripe for growth. That includes: search; gaming, where is fields the Xbox 360 console; and cellular phones, where it sells Windows Mobile.

Ballmer also sees market share opportunities in Microsoft’s Office business.

“We have a lot of opportunities to work on market share,” Ballmer said.

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Posted by Mark Boslet

Nokia Handset Business Tumbles, Now Expects Global Mobile Market To Drop 10% In 2009

January 22, 2009
The Consumer Electronics Association hopes for a 2.1% in cell phone sales in 2009. Wishful thinking?

The Consumer Electronics Association hopes for a 2.1% in cell phone sales in 2009. Wishful thinking?

The world’s largest maker of mobile phones posted today a 69% drop in fourth-quarter profit of $751 million and a 19% revenue decline, still at over $16 billion.

During the last quarter, Nokia shipped 113.1 million handsets, down 15% over last year.

The mobile phone manufacturers are being hit hard in ’09

Competitors are not doing much better either.

Last Friday, rival handset maker Sony Ericsson posted a second-straight quarterly loss at $245 million. And Motorola also said it will report a fourth-quarter loss and slash an additional 4,000 jobs.

Meanwhile, Nokia lowered its outlook for global mobile devices sold in 2009, saying it now expects them to fall 10% compared to an earlier forecast of a 5% drop.

At the Consumer Electronics Show earlier this month, the CEA hoped for a 2.1% sales growth in mobile phones. That might be just wishful thinking at this point.

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Posted by TechPulse 360

Sony, LG Electronics Losses Blamed On LCD TV Sales Shortfall

January 22, 2009

Despite optimist predictions, consumer electronics companies might face a tough year ahead after all.

Sony reported today a record annual operating loss of nearly $3 billion. The first loss in 14-years and the second-ever since it started reporting earnings in 1961.

Meanwhile, Korean giant LG Electronics swung last quarter to a net loss of $490 million, the first in 2-years.

Both companies pointed to a hefty sales shortfall in flat-panel TV sales and an unfavourable foreign-exchange rate for their poor performance.

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Posted by TechPulse 360

eBay’s Skype Proves To Be A Growing Standalone Business; Ready For Sale

January 21, 2009
Skype revenues have enjoyed a double-digit growth, albeit slowing

Skype revenues have enjoyed a double-digit growth, albeit slowing

Although Skype’s value is nowhere close to the $2.6 billion eBay paid for, it does prove to be a stable and double-digit growing business, albeit slowing.

In 2008, Skype generated over half a billion dollars in revenue and has now 405 million customers, up from 276 million a year ago.

Overall the number of free Skype-to-Skype minutes and the paid Skype Out minutes grew at a rapid pace over the past year: 20.5 billion (+72%) and 2.6 billion (+61%), respectively.

Astonishing numbers making Skype at least one of the leading voice-over-IP (VOIP) company in the world, if not the world’s largest consumer VOIP provider.

“Skype had a terrific year… it’s a great standalone business,” said eBay CEO, John Donahue in a conference call with investors.

But minimal synergies between Skype and the rest of eBay

Despite the rosy picture, eBay seems to be ready to let Skype go solo. At this point, the San Jose, Calif.-company has nothing to loose but all to gain to divest its Skype business unit, having wrote-off over half ($1.39 billion) of its initial investment in the communications start-up last year.

“The synergies between Skype and the other parts of our portfolio are minimal. So we’re going to continue to run and operate the business. It’s not a distraction currently,” said eBay’s CEO about Skype on a response to a Wall Street analyst question.

No doubt now that eBay is shopping Skype around but with at least a $1 billion price tag around its neck, making it a hard sale in this cash-strapped economy.

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Posted by TechPulse 360

eBay’s Auction Business Drops 19% In 2008

January 21, 2009

eBay’s auction business – part of  the “Marketplaces” unit – is in serious need of an overhaul and must be more seller-friendly to fight steep decline.

Marketplaces sales – which also combines Shopping.com, StubHub, Kijiji and other e-commerce sites – declined 19% in 2008, at $1.046 billion amid loosing 10 million users!

The volume of merchandise sold (excluding vehicles) on eBay’s core business sites was $11.47 billion for the quarter, a decrease of 12%, compared to the fourth quarter of 2007. eBay receives a cut on each item sold, plus listing fees.

Meanwhile, online classifieds as well as text and graphical advertising revenue grew during the quarter.

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eBay Records Historic Sales Decline, But Boosts Profits

January 21, 2009

For the first time in its 13 years history, eBay saw its year-over-year quarterly sales decline.

The most-visited retail site on the Web – with 84.5 million visitors during the last holiday season – had revenues of $2 billion, a 6.6 per cent drop from the same quarter last year. Meanwhile, profits tumbled 31 per cent to $367.2 million.

However, excluding non-cash charges, eBay numbers weren’t quite as bad. Actually, the San Jose, Calif.-company even slightly beat Wall Street analysts estimates.

In a conference call with investors, eBay CEO John Donahue said that although the revenue drop was just a reflection of the down economy, eBay’s 2008 financial results were strong.

For the current quarter, eBay is expecting revenues to fall between $1.8 billion and $2.01 billion.

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Seagate Reports Record Losses, Forecasts Continued Sales Drop

January 21, 2009

The world’s largest hard-drive maker reports for its fiscal second quarter today a net loss of $496 million, on revenues of $2.27 billion, compared to a gain of $403 million and revenues of $3.42 billion last year.

This is Seagate’s first quarterly loss since 2004. Looking ahead, Seagate expects fiscal third-quarter revenue of $1.6 billion to $2 billion.

Competitive price pressure will continue through 2009

Last quarter, gross margin fell to 14.2% from 26% due to competitive price pressures, both for its retail and OEM businesses. The company shipped 37 million hard-disk drives but is loosing market share to rival Western Digital in the faster-growing notebook segment.

Last week, Seagate appointed Chairman Stephen Luczo the top post, replacing CEO Bill Watkins and COO Dave Wickersham. Luczo was Seagate’s CEO from 1998 to 2004 and led the company move to go private and public again.

The Scotts Valley, Calif-company also said it would cut about 2,950 jobs, or about 6% of its work force, and salaries of its top managers by as much as 25%.

Seagate’s debt is now junk

Seagate’s current debt load is at a whopping $2.4 billion at the end of the last quarter. Long-term debt maturities over the next 18 months consist primarily of $300 million in October of 2009 and $135 million in April of 2010.

The company’s credit ratings is now in junk territory downgraded by all three major rating agencies making it much painful to borrow more capital.

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Apple Pans Netbook Market

January 21, 2009

Apple said Wednesday it is not interested in playing in the market for netbooks.

Sales of these cheap and sometimes miniature laptops that sell for $500 or less have been hot in recent months.

Netbook screens are small and keyboards cramped, says Timothy Cook

Netbook screens are small and keyboards cramped, says Timothy Cook

“We think products there are inferior,” said Apple COO Timothy Cook, who took over day-to-day operations at the company from Steve Jobs earlier this month. “We don’t think people will be pleased with those products.”

Cook said the machines aren’t powerful enough to satisfy consumer needs. Keyboards are cramped and screens are small, he added.

Rumors have suggested Apple may be developing a product for the market. Cook didn’t say one way or another.

“We’re watching that space,” he said.

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Posted by Mark Boslet

Apple Vows It Will Not Let Rivals Steal Its IPhone Technology (But Doesn’t Mention Palm By Name); Rules Out Low End IPhone

January 21, 2009

Apple said it would not let competitors in the cell phone market swipe its intellectual property in an attempt to duplicate the success of the iPhone.

“We will not stand for having our IP ripped off,” COO Timothy Cook said Wednesday on a first-quarter earnings conference call. “We will use every weapon at our disposal.”

Palm Pre resembles the iPhone

Palm Pre resembles the iPhone

Asked moments later whether his comments were specifically aimed at Palm, which announced its first touch-screen phone, the Pre, and a new operating system earlier this month, Cook declined to say.

He only added that Apple is ready to compete, but not let rival steal its innovations. “We believe we are years ahead of the competition” in software development, he said earlier on the call.

Palm has a touch-screen interface not unlike Apple’s.

On the conference call, Apple did say it has seen a burst of iPhone sales since it lowered the handset’s price to $199. When the price fell from $599 to $399, sales increased, Cook said. They increased again when $399 became $199 with the introduction of the faster 3G phone last June.

“There is clearly price elasticity in the market,” he said.

Cook did not say whether Apple plans a lower priced product, or an iPhone Nano as rumors suggest. But “were not going to play in the low end voice business,” her said. “Our objective is not to be the units leader in the cell phone business.”

3 Comments | computers, news, wireless | Tagged: , , , , , | Permalink
Posted by Mark Boslet

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