Business Tech

On the heels of announcing its acquisition of 3Com, Hewlett-Packard also gave a sneak peek at its fourth-quarter earnings.

Though not scheduled to officially announce earnings until November 23, HP said Wednesday it expects to report revenue of $30.8 billion for the quarter on earnings of 99 cents per share. (Excluding one-time charges, it would have earned $1.14 per share.) While revenue was down 8 percent compared to the same quarter a year ago, earnings were up from 84 cents per share in the fourth quarter of 2008.

Analysts were expecting earnings of $1.12 per share and revenue of $29.8 billion.

"Solid execution drove exceptional performance for HP this quarter, fueled by significant growth in China," HP Chairman and CEO Mark Hurd said in a statement Wednesday. "We are delivering on our strategy and are well positioned going into 2010."

The company also raised its outlook for 2010. For the first quarter, HP is estimating $29.6 to $29.9 billion in revenue, and earnings between $1.03 and $1.05 per share excluding 13 cents per share of after-tax costs and charges related to restructuring and acquisitions.

After three quarters of losses, Lenovo has turned a profit again. The computer maker announced Thursday that its fiscal second-quarter earnings more than doubled to $53 million versus $23 million a year ago.

Profit for the quarter ended September blew way past estimates of only $24 million from analysts surveyed by Bloomberg.

Despite a 5.2 percent sales decline to $4.1 billion from $4.3 billion in the year-ago quarter, Lenovo achieved its profits through extensive cost cuts and a record leap in market share.

(Credit: Lenovo)

The company had previously kick-started a major restructuring program designed to trim expenses and streamline business operations. As a result, Lenovo was forced to lay off a sizable number of employees and take a one-time restructuring charge of $3 million in the second quarter. But the company now expects to save around $300 million annually.

During the quarter, Lenovo says it also saw its worldwide PC shipments surge 17 percent over the prior year, dramatically outpacing the industry average of only 2.3 percent.

"In the last quarter, our share in the global market climbed to a historic high and we returned to profit," said Lenovo CEO Yang Yuanqing in a statement. "At the same time, our expenses-to-revenue ratio improved notably, reaching the best level since the acquisition of IBM's PC division. These achievements bear witness to the clear strategies we set at the beginning of the year and our effective execution of those strategies."

Lenovo's quarterly results were powered by its notebooks, which contributed 63 percent to overall revenue. Though notebook sales dipped 1 percent from the prior year, shipments shot up 37 percent, compared with an industry average of 16 percent.

During the quarter, the company unveiled a few new products, including the IdeaPad U450p, a thin and light consumer laptop, and SimpleTap, an application to help users navigate the touchscreens on Windows 7-enabled machines like the ThinkPad X200 Tablet and ThinkPad T400s.

Desktop sales, however, fell 13 percent from the prior year's quarter, kicking in only 35 percent to Lenovo's overall revenue. Desktop shipments fell 2 percent, but outpaced the industry average of a 12 percent decline. The company said it has reacted to the PC market shift from desktops to laptops by introducing new entry-level low-cost desktops and revamping its product line for small and medium-sized businesses.

Lenovo enjoyed a stellar second quarter in its home base of China where sales jumped 9 percent to $2 billion. Shipments in the country jumped 28 percent compared with the average of only 0.1 percent. Already the leading PC vendor in China, the company boosted its market share there to 29.4 percent.

Earlier this year, Lenovo said that it would refocus its efforts on China and other emerging markets, a strategy that appears to have paid off.

"Our results are moving in the right direction and we are particularly pleased with our performance in China and in the transactional business model," said Lenovo Chairman Liu Chuanzhi in a statement.

The year had been a volatile one for Lenovo. The company was hit a string of quarterly losses, leading to the resignation of President and CEO William Amelio in February. Job cuts and the restructuring also took their toll.

But based on its second quarter, Lenovo is optimistic about the near term.

"In the coming quarters, we will continue to reinforce our leadership in China, improve the sustainability and profitability of mature markets, seize growth opportunities in emerging markets and our transactional business, continue to strengthen cost structure, and innovate with raising efficiency and customers' needs in mind," said Chuanzhi.

Cisco Systems reported fiscal first-quarter earnings that beat expectations with good sequential growth, giving hope that the ailing economy is on the upswing.

The network equipment maker on Wednesday reported that fiscal first-quarter profits and revenue that were down from the same quarter a year ago but up from the previous quarter.

Cisco reported a quarterly profit of $1.8 billion, or 36 cents a share, compared with a profit of $2.2 billion, or 42 cents a share, for the same quarter a year ago. Revenue for the first fiscal quarter in 2009 was $9 billion, down from $10.3 billion during the same quarter a year prior.

Analysts had expected Cisco to report earnings of 31 cents a share on revenue of $8.75 billion, according to Thomson Reuters.

Even though revenue and earnings were lower than a year ago, Cisco grew revenue and earnings, compared to the previous quarter. In the fiscal fourth quarter, Cisco reported profits of $1.1 billion, or 19 cents a share. And it reported revenue of $8.5 billion.

Cisco CEO John Chambers commented on the company's strong sequential growth, saying the gains are a good indication that economy is in recovery.

"Building off what we saw as a clear tipping point in (the fourth quarter), our (first-quarter) results continued to reflect strong sequential growth trends that meet or exceed expectations during normal economic times," he said in a statement. "We view the improving economic outlook, combined with solid execution on our growth strategy, as creating unparalleled opportunity to drive more value into the core of the network."

Helped by cost cuts and by growth in Internet and phone subscribers, Comcast on Wednesday reported a 22 percent jump in earnings for its third quarter.

The cable provider saw net income of $944 million, or 33 cents per share, for the quarter ended Sept. 30, compared with $771 million (26 cents per share) in the year-ago quarter. Sales also rose, hitting $8.8 billion, up from $8.5 billion in 2008's third quarter, though revenue was slightly below analysts' estimates.

Comcast's third-quarter sales

(Credit: Comcast)

For the quarter, the number of TV subscribers dropped 2.7 percent to 23.7 million from 24.4 million a year ago. But the loss was more than offset by gains in Internet and voice, two services that Comcast has marketed heavily, especially as part of its Triple-Play service.

The number of Internet subscribers rose 6.4 percent to 15.6 million, while Comcast phone customers jumped 20 percent to 7.3 million. Overall, the company saw a quarterly increase in customers of 3.4 percent to 46.8 million. Subscriber growth helped boost third-quarter sales for the cable segment by 2.8 percent to $8.4 billion.

Comcast Internet and voice customers grow.

(Credit: Comcast)

With a focus on trimming costs, capital expenses declined 6.1 percent to $1.2 billion, due in large part to lower spending at the company's cable divison.

"The strength and resilience of our businesses combined with our continued emphasis on expenses and prudent capital management helped us achieve healthy operating and financial results in the third quarter," Brian Roberts, chairman and chief executive officer, said in a statement.

Comcast revealed no new details over its intent to acquire a leading stake in GE-owned NBC Universal. Early last month, reports surfaced that the company wanted to buy a 51 percent chunk of NBCU, with GE owning the rest, to create a new joint venture. If it goes through, the deal could transform Comcast into a major media powerhouse, with control of NBC as well as variety of TV networks and cable stations.

SAP saw a 12 percent gain in earnings for its third quarter but a 9 percent drop in sales, the company reported Wednesday. The software maker also expects a larger sales decline for the full year, news that sent its shares tumbling more than 7 percent in morning trading.

For the quarter ended September 30, SAP earned 435 million euros ($643 million) versus 389 million euros in 2008's third quarter. The company attributed the earnings gain to better profit margins due to cost cuts and a more favorite tax rate (21 percent versus 31.9 percent a year ago) from acquisition-related items.

(Credit: SAP)

"We are pleased to report another quarter of increasing margins despite a decline in revenues. This demonstrates our continued success in maintaining tight cost controls," Werner Brandt, SAP's chief financial officer, said in a statement.

Revenues did decline, dropping to 2.5 billion euros from 2.8 billion euros in the third quarter of 2008. Software sales took the largest hit, sinking 31 percent to 525 million euros from 763 million euros a year ago. Revenue from SAP services fell 3 percent.

The outlook for the full year has also gone sour. The company now expects 2009 sales for both software and services to drop by between 6 percent and 8 percent, larger than the 4 percent to 6 percent forecast earlier this year. Like many of its competitors, SAP is experiencing sluggish demand globally for software and services.

"While we are seeing signs of stabilization in the general environment, the market remains difficult. Third-quarter software and software-related service revenues came in lower than we expected mainly because of a particularly challenging environment in the emerging markets and Japan," said Brandt.

To stem the tide, SAP is now focusing on making deals that are smaller and longer term.

"Despite the continued tough spending environment, we are pleased to see further progress in the evolution of our volume business as a result of smaller deals," said SAP CEO Leo Apotheker in a statement. "In addition, we are driving more multiyear agreements, where customers buy and consume software over many periods, which we believe is a positive transition for both SAP and our customers."

In January, SAP had predicted that 2009 would be a challenging year, forcing it to further cut costs and trim jobs.

You wouldn't know there's been a slowdown in consumer spending by looking at Amazon.com and Netflix.

Both companies have continued to grab customers at a record pace, leading to higher earnings and sales for their third quarters.

Net income for Amazon jumped 68 percent to $199 million, or 45 cents a share, in the quarter that ended September 30, compared with $118 million, or 27 cents a share, in the prior year's quarter.

Sales rose 28 percent to $5.45 billion versus $4.26 billion in 2008's third quarter, the company said Thursday.

Amazon's stock shot up $23.75, or 25 percent, to $117.29 in Friday trading.

Amazon's two-year stock chart.

(Credit: Yahoo Finance)

Amazon attributed its earnings to several key factors.

Chief Financial Officer Tom Szkutak said Thursday in a conference call with reporters that consumers continue to spend at Amazon because of its low prices and large selection. The company noted that it had 98 million customer accounts by the end of the third quarter, 17 percent higher than a year ago.

Worldwide sales from books, CDs, DVDs, and other media grew 17 percent to $2.93 billion, while revenue for electronics and other general merchandise soared 44 percent to $2.36 billion.

Another solid driver for growth was the Amazon e-book reader, Kindle.

"Kindle has become the No. 1 bestselling item by both unit sales and dollars--not just in our electronics store but across all product categories on Amazon.com," Amazon CEO Jeff Bezos said in a statement. The company did not release specific sales figures for the Kindle.

Amazon managed to clobber analysts' expectations. J.P. Morgan had forecast earnings per share of 31 cents on sales of $5 billion. Broadpoint.Gleacher analyst Ben Schachter had been eyeing earnings per share of 33 cents and said that sales were 7 percent higher than he expected.

In a report, J.P. Morgan said Amazon's strong sales growth shows that the company is grabbing significant market share from other e-commerce players, such as eBay.

In his report, Schachter called the results "phenomenal." He noted that Amazon was able to keep its costs in check while gaining market share in virtually every product category. The analyst also said he was "shocked" to hear Bezos' statement that the Kindle has become the company's top-selling item.

For the current quarter, Amazon is looking for sales of $8.13 billion to $9.13 billion, 21 to 36 percent higher than last year's fourth quarter, and racing past analysts' estimates of $8.11 billion.

Collins Stewart analyst Sandeep Aggarwal said in a report that improving e-commerce trends and continued growth for the Kindle, among other factors, could make Amazon the fastest growing large-cap Internet stock.

Another beneficiary of solid customer growth, Netflix also surpassed analysts' expectations for the third quarter.

The company's earnings jumped 48 percent to $30.1 million, or 52 cents a share, versus $20.4 million, or 33 cents a share in the prior year's quarter. Sales grew 24 percent to $423.1 million, compared with $341.3 million in 2008's third quarter.

Overall, analysts had been expecting earnings of 46 cents per share on sales of $420 million.

Growth in subscribers was the key driver for Netflix in the third quarter. The company ended the quarter with around 11.11 million subscribers, a 28 percent jump from the 8.67 million subscribers at the end of 2008's third quarter. Of the current total, 98 percent, or 10.84 million, were paid subscribers, while the remaining 2 percent were free subscribers.

"Our business momentum is strong and our third quarter performance keeps us solidly on course for a record 2009," Netflix co-founder and Chief Executive Officer Reed Hastings, said in a statement.

Though most Netflix customers still prefer to get their movies by conventional mail, Internet streaming has gradually taken off. In the third quarter, 42 percent of Netflix subscribers streamed at least 15 minutes of video, compared with only 22 percent in the prior year's quarter.

Customers can stream their Netflix picks not just through the PC but via gadgets like Microsoft's Xbox 360, which has helped attract new customers.

Now Netflix has reportedly struck a deal to add streaming to another device, which Hastings said is already in people's homes. Though the company has been mum about details, analysts believe it may be a video game console made by either Sony or Nintendo.

Netflix shares were up $4.58, or 9 percent, to $54.22 on Friday.

For the fourth quarter, the company believes customer growth and sales will be higher than anticipated three months ago. Netflix now expects to end the current quarter with 12 million to 12.3 million subscribers, up from the prior estimate of 11.6 million to 12 million. That would represent an additional 900,000 to 1.2 million customers.

Fourth-quarter sales are likely to reach $440 million to $446 million, up from the previous estimate of $431 million to $445 million.

However, the company forecasts a downturn in earnings from the third quarter, eyeing fourth-quarter net income of $21 million to $26 million, or 38 cents to 47 cents a share.

Expenses may be one factor affecting current earnings. Hastings said the company expects to spend more on marketing and licensing fees for Internet streaming. Netflix also believes its postal costs will continue to grow, surpassing $600 million next year and $700 million in 2011.

EMC Chief Executive Joe Tucci said Thursday that customers are "signaling more comfort spending their IT budgets." The company reported better-than-expected third-quarter results.

The storage giant reported earnings of $298.2 million, or 14 cents a share, down 24 percent from the same period a year ago. Revenue was $3.52 billion, down 5 percent from a year ago. Under a non-GAAP basis, EMC reported earnings of $480.3 million, or 23 cents a share, 2 cents better than Wall Street estimates.

Generally speaking, EMC has been well-positioned in the downturn because of a focus on storage, cloud computing, virtualization, and data centers--hot areas in enterprise IT.

Read more of "EMC: Customers have 'more comfort' about IT budgets" at ZDNet's Between the Lines.

IBM delivered a solid third quarter that featured better-than-expected profit and revenue growth. The company also upped its earnings targets for 2009.

IBM on Thursday reported third-quarter net income of $3.1 billion, or $2.40 a share, on revenue of $23.6 billion, down 7 percent from a year ago. Wall Street was looking for earnings of $2.38 a share on revenue of $23.4 billion.

The outlook was also solid. IBM is expecting 2009 earnings to be about $9.85 a share, up from a previous projection of $9.70 a share. Wall Street had IBM at $9.78 for the year...

Read more of "IBM delivers solid quarter, ups 2009 earnings outlook" at ZDNet's Between the Lines.

Advanced Micro Devices posted a third-quarter loss of $128 million, lower than Wall Street projections, while also reporting revenue that beat expectations.

The loss, at 18 cents a share, compares with a loss of $134 million, or 22 cents a share, for the same period last year. Analysts had expected a loss of 42 cents a share.

Revenue was $1.4 billion, an 18 percent increase over the second quarter of this year, while falling 22 percent compared to the third quarter of 2008. Forecasts had called for only $1.3 billion in revenue.

"There was strength in notebooks and China," said Dirk Meyer, AMD president and CEO, speaking during the company's earnings conference call on Thursday afternoon. He added that there is "an increased focus on small form factor" laptops at AMD and that upcoming inexpensive, thin laptops based on AMD processors should be priced lower than Intel-based offerings. And Meyer said AMD will broaden its processor offerings in this area going into the holiday season.

Meyer also spoke to AMD's future 32-nanometer silicon. Products codenamed "Fusion" that combine the graphics function with the main processor will be based on 32-nanometer technology and ship in the second half of 2010, Meyer said.

AMD is currently moving most of its production to 45-nanometer-based processors. Intel, on the other hand, will begin to move to 32-nanometer by the end of this year. Generally, the small the geometry, the faster and more power-efficient the chip is.

Addressing graphics processing units (GPUs), Meyer said that its recently-introduced 5800 series products have been well received but that the average selling prices of GPUs were down compared to the prior quarter and are still below central processing units or CPUs, which are higher.

"Growth in microprocessor and graphics unit shipments drove an 18 percent sequential revenue increase, while improved factory utilization rates, higher microprocessor average selling price, and an increase in 45 (nanometer) product shipments resulted in a gross margin improvement from the prior quarter," Meyer said in a statement.

AMD expects its product company (non-manufacturing-related) revenue to be up modestly for the fourth quarter of 2009.

AMD was the world's second-largest seller of microprocessors in the second quarter of 2009 with an 11.9 percent share of global revenue behind market-leader Intel, according to market researcher iSuppli.

Updated at 3:30 p.m. PDT: adding comments from earnings conference call.