IT Report Card Week: Why It Matters

 
 
By John Hazard  |  Posted 2008-07-17 Email Print this article Print
 
 
 
 
 
 
 

It's report card week in Silicon Valley (also in Armonk, N.Y., and Redmond, Wash.) and Google, Microsoft, IBM, Intel and AMD, all bellweather tech companies, report quarterly earnings this week.

Key takeaways:

  • Intel is up and AMD is doing better, signs PC demand remains strong. Intel and AMD are also signs of the spending on enterprise infrastructure, as their x86 chips sit at the core of the data centers being built at a record pace.

  • Microsoft is the largest software vendor and while shrinking in significance, its performance still matters. Expect it to do well, as those desktop and notebook shipments that helped Intel need to run an OS.

  • IBM's role as enterprise supplier and integrator make it a key barometer of the industry. Expect Big Blue to do well across the board.

  • Google's performance, expected to be up more than a third, is a sign of the search advertising and cloud computing model uptake.

    Intel, PC Shipments Set the Bar

    Intel set the bar July 15, reporting a record $9.5 billion quarter. Intel's performance rests on a strong demand for laptops, especially cheap ones, which are driving sales of its fat-margin mobile chips. Intel's performance bodes well for the larger PC industry, which might be looking up, writes eWEEK's Scott Ferguson:

    The fact that Intel increased its second-quarter revenue 9 percent and its net income 25 percent compared with the second quarter of 2007 should come as a welcome sign for the PC industry, as the U.S. economy and slower IT spending remain major concerns. In the last few weeks, several research firms indicated that PC shipments and revenues were better than expected and being driven by consumer demand for notebooks both in the United states and overseas.

    PC shipments are holding up, according to reports from researchers IDC and Gartner. Both reported PC shipments grew by about 15 percent for the quarter. Interestingly, Apple is now the No. 3 PC vendor in the United States.

    AMD, Intel's chief rival in the x86 chip space, reports this evening. AMD is expected to report a narrower loss than the previous years. Unlike Intel, AMD failed to take advantage of the notebook and PC shipments because of a stale PC offering, analyst Craig Berger of Friedman, Billings, Ramsey & Co. told MarketWatch.

    IBM, Microsoft Set the Curve

    But the curve could be set by IBM and Microsoft, both set to report today.

    IBM is expected to report healthy returns across the board.

    IBM's size and role as core enterprise supplier and integrator lend it exponential weight as a barometer of the enterprise IT economy. IBM, especially its IBM Global Services division, is an indicator of how and where enterprises are spending their IT dollars. If customers are buying IBM, they're likely buying Cisco, HP, Dell, EMC, etc. Its role as channel supplier also makes it a canary in the reseller mine.

    Microsoft is also expected to benefit from desktop and notebook sales. Those PCs shipped need to run something. Microsoft closed its fiscal year June 30 and is expected to report earnings up about 20 percent.

    Microsoft may be shrinking in importance as enterprises adopt new software options and models, but it remains the largest software supplier to the enterprises. The performance of business applications of Microsoft CRM, and Microsoft's Dynamics line, as well as products such as Exchange, SharePoint and Communications Server are signs of later things to come from rivals such as Oracle, Salesforce.com and SAP.

    And Then There's Google

    In terms of revenue, Google remains about one-third Microsoft's size, but its position in the search advertising and cloud computing space now driving the industry make it a prominent indicator of industry health.

    Google is expected to report profit of $3.87 billion. Executives are likely to note the bigger role the integration of DoubleClick has played this quarter.

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