Microsoft Bumping Along The Bottom

July 23, 2009

Microsoft said Thursday fourth-quarter profits fell 29 percent, ending a year that saw revenue fall for the first time since the company went public in 1986.

Improvement is expected in 2010, but it is hard to say when, says Microsoft CFO Chris Liddell, pictured here with Steve Ballmer

Improvement is expected in 2010, but it is hard to say when, says Microsoft CFO Chris Liddell, pictured here with Steve Ballmer

But finally there are signs of a steadier economy, said CFO Chris Liddell.

“At least we’re seeing signs of the bottom,” Liddell said on an earnings conference call with analysts. “I see us going along the bottom for some time to come.”

The company’s fortunes have waned as the global downturn suppressed PC sales and slowed business purchases of technology

But now the world’s largest supplier of PC software says the economy is stabilizing, even if sales remain well below those of a year ago. Next year will bring an improvement, but it is difficult to say when, says Liddell.

Until then, conditions for the remainder of 2009 should be similar to what the economy dealt out in the recently concluded three months.

In terms of Microsoft’s own fortunes, Windows 7 should allow it’s crucial Windows business to grow faster than the PC market by the middle of next year, Liddell said.

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Posted by Mark Boslet

Consumer Attitudes Still Low But Job Worries Ease

March 18, 2009

Consumers are still deeply pessimistic about the economy.

Mirroring this is their intention to shop, which dipped further in February, according to NPD Group. The research firm found in a recent survey that consumer buying intensions slipped noticeably in February and is now at a level well below December.

The report does not paint a rosy scenario for an economic rebound.

However, the survey did find some better news: a leveling off of concerns about job security. Thirty-four percent of consumer reported they were very concerned about losing their jobs in February compared with 36 percent in January.

“Of all the data I look at, this measure provides one of the best indications of how consumers are going to behave.  February’s results show consumers feeling better on this front and could signal consumer stabilization,” said Marshal Cohen, chief industry analyst.

Consumer buying intentions. Source: NPD Group

Consumer buying intentions. Source: NPD Group

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Posted by Mark Boslet

With 40% Of Global Wealth Gone, Do Not Expect A Quick End To The Downturn

February 19, 2009

This is a balance-sheet downturn, quips Stanford law professor Joseph Grundfest.

This is a balance sheet contraction, says Joseph Grundfest

This is a balance sheet contraction, says Joseph Grundfest

Bank assets are marked down, stocks crashed and home values have fallen.  In the past two years, 40 percent of the world’s wealth disappeared, Grundfest calculates.

“The problem is bigger than government,” he said Thursday at a Churchill Club gathering on the financial crisis. “We shouldn’t fool ourselves into believing (government spending) is going to lead to a vibrant economy in three years.”

If there was one message from the club’s panel discussion it was exactly that: don’t expect a quick turn around. Several panelists predicted the global decline that accelerated in December would last for years.

“This is a drastic resetting of everything,” said Patricia Sueltz, CEO of the startup LogLogic and a former Salesforce.com executive. “We’ve got to lower our expectations.”

There is a drastic resetting of everything, says Patricia Sueltz

There is a drastic resetting of everything, says Patricia Sueltz

While governments in the U.S. and elsewhere hope to spark consumer and business spending with stimulus packages, adjusting product prices will take the market place time.

It is not irrational that banks don’t want to lend into such as environment, says Grundfest. They respond, this “is not in our self interest,” he said.

Bill Coleman, CEO of Cassatt and founder of BEA Systems, predicted that it is possible the U.S. can avoid double-digit unemployment.

But he said the Dow Jones Industrial Average may not stabilize for another couple months at a price not lower than 6,000.

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Posted by Mark Boslet

Online Job Listings Tumble By 1 Million In Two Months

February 4, 2009

In a sign of the disappearing job market, online job listings fell more than 1 million in the past two months.

The online listings plummeted 506,000 in December after a drop of 507,000 in December, according to the Conference Board. There remain 3.4 million jobs advertised online.

The Conference Board said declines were evident in all regions of the country, with big drops in New York, Texas, Florida and California.  Addressing employment in the nation more broadly, the board said it anticipated continued large job losses in the months to come, likely to be reflected in online listings and off-line advertising.

“An expected increase in the unemployment numbers coming out at the end of this week, combined with this sharp January drop in labor demand, will widen the labor supply/demand gap,” said Senior Economist Gad Levanon. “In December, the number of unemployed looking for work already exceeded the number of advertised vacancies by 7.3 million.”

Yikes!

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Posted by Mark Boslet

Never Seen So Much Uncertainty Before, VMware Says

January 26, 2009

VMware said Monday that it sees no signs of an end to the freefall in information-technology spending.

First quarter will be quarter of indecision, says Paul Maritz

First quarter will be quarter of indecision, says Paul Maritz

The Palo Alto company is among the hottest firms in the software business with its industry leading virtualization products. But it is proving far from immune to the global economic downturn.

“All the indications we have is that the first quarter is going to be a quarter of indecision” as far as corporate budgets and IT spending go, said CEO Paul Maritz. “We’ve never seen this level of uncertainty before.”

VMware posted fourth quarter revenue of $515 million, up 25 percent and ahead of Wall Street expectations, and net income that grew 42 percent to $111 million. But its stock fell when it estimated first quarter sales would come it at $475 million with a 10 percent decline in license revenue.

“We don’t believe 2009 budgets have been finalized by our customers,” said CFO Mark Peek on a conference call.

The sputtering technology market is likely to continue into 2009 with spending more likely to take place in the second half of the year, he said.

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Posted by Mark Boslet

Venture Capital Investing Plummets In The Fourth Quarter

January 24, 2009

Venture capital investing collapsed in the fourth quarter with spending on startups falling 45 percent from a year ago.

According to a report released Saturday morning, only 818 deals were done during the volatile three months and $5.4 billion invested, the lowest amount since the first quarter of 2005.

For all of 2008, VC’s placed $28.3 billion, 8 percent less than 2007 and the annual decline since 2003, said the report from the National Venture Capital Association, PricewaterhouseCoopers and Thomson Reuters.

The findings parallel a similar study released a week ago by Dow Jones VentureSource.

The reports suggest that as the financial crisis gripped Wall Street and corporate product demand began to unravel, VCs sharply slowed their activity in face of market uncertainty.

There are few signs of a dramatic reversal ahead.

The fourth-quarter dip hit most industries, from life sciences to software to Internet companies. In software, VCs funded the fewest number of companies since 1997. Internet investing fell 26 percent,

Even investments in clean-tech startups dropped 14 percent to $909 million. Sixty-two deals were funded.

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Posted by Mark Boslet

Memory Chip Maker Qimonda Files For Bankruptcy

January 23, 2009

A victim of the worldwide recession and the falling price of memory chips, German semiconductor maker Qimonda filed for bankruptcy on Friday.

Questions raised about continued production at Qimonda

Questions raised about continued production at Qimonda

The company had been in bailout talks with Infineon, which has a 77.5 percent ownership stake, the German state of Saxony and a Portuguese bank. The plan would have given it cash through the end of the year.

Qimonda blamed falling chip prices for scuttled the deal. The price of DRAM memory chips used in computers fell more than 70 percent last year.

According to Dow Jones, suppliers have already begun to halt shipments of supplies and materials to the ailing firm, a sign it might not continue to operate. With the memory chip business still plagued by overcapacity, the closing of the Qimonda factories would be welcome by other chip makers.

Infineon spun off Qimonda in 2006.

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Posted by Mark Boslet

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

Intel To Close Manufacturing Plants Affecting More Than 5,000 Jobs

January 21, 2009

Intel plans to cut its manufacturing capacity because of slow demand.

The company said Wednesday it will close assembly and test facilities in Penang, Malaysia, and Cavite, the Philippines. It also will halt production at Fab 20, an older 200mm wafer fab in Hillsboro, Ore.

Wafer production will end as well at the D2 facility in Santa Clara, Calif., the last one the company has in Silicon Valley.

The restructuring will affect between 5,000 and 6,000 jobs, though some of the employees may be offered jobs elsewhere within the corporation.

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Posted by Mark Boslet

Outsourcing To Grow In 2009 Despite Satyam Scandal

January 15, 2009

The Satyam financial fraud scandal has rocked the outsourcing world, but the market should grow in 2009 despite headwinds from the crisis in India and the global economic pullback.

Satyams Infocity campus in India

Satyam's Infocity campus in India

Outsourcing will become a carefully considered as more organizations seek to cut costs and plan for long-term recovery, says Gartner. This will be especially true as economic woes force businesses to change their strategies in a hurry.

Competition in the market will be fierce with vendors offering low prices to build market share or meet quarterly revenue goals. Current contracts will come under pressure as well, with customers renegotiating terms in response to downsizings, acquisitions, divestitures and general cost cutting.

In this environment, new services will boost adoption, including vendor offerings built around software-as-a-service, computing and storage infrastructure delivered as a utility, cloud computing and remote system management.

“During the next five to seven years, a broad set of new and alternative IT delivery models — already in use by aggressive early technology adopter organizations — will become mainstream,” said Research Vice President Ben Pring.

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Posted by Mark Boslet

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