July 21, 2006 11:24 AM PDT

Week in review: Behind the earnings

It wasn't just quarterly earnings numbers that made big news this week, it was the stories of what led to profit rises and falls, and what the trends mean for the future.

Intel's quarterly revenue and profit, for example, dropped amid a bruising battle with Advanced Micro Devices, but the pain wasn't as severe as expected.

The still-dominant chipmaker's net income fell for the second quarter--but it was still enough to beat Wall Street's profitability predictions.

The numbers reflect the company's loss in market share to longtime rival AMD, whose Opteron processor family has found its way into machines from the top four server makers. Intel, whose quad-core server, desktop processors and Montecito server will arrive this year, also has a glut of inventory.

The earnings also explain the need for a recent 1,000-manager layoff and set in motion a major executive reorganization first reported by CNET News.com on Wednesday.

AMD, for its part, came in with second-quarter results below the company's targets as it bore the brunt of the price war. Revenue from desktop processors was lower than expected due to deep price cuts by Intel, AMD executives said on a conference call. Earnings also came in lower than expected.

In a related move that could tighten the squeeze on Intel, AMD and IBM are expected to form an alliance that will lead to mainstream IBM servers based on the Opteron processor.

On the software front, Microsoft reported earnings were just ahead of analysts' expectations as the company announced a plan to buy back as much as $40 billion worth of its stock, half of it through a tender offer next month. The software giant said it has already completed the $30 billion stock buyback announced two years ago.

Meanwhile, Apple Computer's revenue fell a little short of expectations, but profitability was far higher than expected and Mac sales increased at a healthy clip.

Analysts had been worried that Apple's iPod growth had trailed off in the middle of a long stretch without a significant redesign or new feature. Apple sold 8.1 million iPods during the quarter, and a Piper Jaffray research report earlier Wednesday said anything over 8 million would be a "slight positive."

Mac sales, during what was considered a poor quarter for the PC market, were up 12 percent compared with last year. Apple said 75 percent of all Macs sold during the period used Intel's chips.

The Mac news got CNET News.com readers talking, as one suggested that Apple branch out and release an operating system compatible with any x86-compatible PC. "They could ask more money for the PC version, since they wouldn't be selling their PC, but think of the profits they could potentially make, we are talking about billions of more in sales," the reader said. "There are millions of people fed up with not the PC, but Windows, that's what they need to do."

Another reader, of course, responded, "How do you expect Apple to continue the same level of quality when they get split a million ways trying to support everyone's computers? The fact that Microsoft does this is one of the reasons for Windows having some of the problems it does. Linux also struggles with support for many hardware devices."

Turning to the Web, Google this week unveiled a Web search site designed to help the blind. The company also posted earnings that beat analyst expectations, as revenue from advertising continued to rise on market share increases.

And Yahoo, which struck a deal this week with real-estate service Zillow.com, posted second-quarter net income that met analyst expectations but was lower than a year earlier on higher stock compensation expenses. Revenue was just shy of analyst estimates.

Tech wheels of justice
In the nation's capital, Attorney General Alberto Gonzales on Tuesday resumed his defense of the Bush administration's warrantless wiretapping program, while admitting that the president prevented a review of the program earlier this year by Department of Justice lawyers.

Gonzales reiterated the president's recent pledge to submit the National Security Agency program to review by a secret court as long as Congress passes a new law that satisfies the White House's demands. That law has been the subject of much criticism and debate.

That issue also got readers talking, mostly about politics, although one tried to bring the focus back to technology. "But what surprises me more is how the technology-inclined audience throws its technical understanding out the window when these articles are printed. Despite all the security warnings, articles on spyware, key loggers, rootkits, etc., they think their information on the Net is private," the reader wrote. "I hate to burst your bubble, but the Internet is a public network."

Also in Washington, a federal judge postponed a key ruling in a lawsuit against Google brought by Agence France-Presse that alleges Google's popular news search feature violates copyright laws.

See more CNET content tagged:
earnings, AMD Opteron, expectation, net income, Week in review

 

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