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Wall Street Beat: Enterprise IT, smartphones boost tech earnings

SAP, Citrix turn in upbeat results as ARM and AMD highlight areas of strength in components arena

By Marc Ferranti
October 28, 2011 11:29 AM ET

IDG News Service - Third-quarter earnings reports from major tech vendors continued to pour in this week, confirming upbeat trends for enterprise software and emerging markets but mixed results for hardware and components.

News from the PC component arena turned more positive toward the end of the week as Advanced Micro Devices on Thursday said its profit for the quarter ending in September came out to $97 million, a big turnaround from a year-earlier quarterly loss of $118 million.

AMD said revenue rose 4% to $1.69 billion. Growth in emerging markets including China balanced out flagging demand in the U.S. and Europe as well as manufacturing problems with GlobalFoundries that disrupted AMD's supply chain.

AMD said it expects revenue for the current quarter to increase sequentially by about 3%, equal to or greater than expectations of analysts polled by Thomson Reuters.

On Tuesday, ARM, which designs chips for the booming smartphone and tablet markets, said that quarterly sales increased 22% to $192 million while profit jumped by a whopping 44% to $55.8 million. ARM is attracting new manufacturing customers as end-user demand for mobile devices grows.

"In the third quarter of 2011, we saw a continued high level of design activity with many new customers licensing ARM technology for the first time, driven by end market requirements for smarter, low-power chips," said CEO Warren East.

In what could be seen as a vote of confidence for the flagging, low-margin hardware market, Hewlett-Packard Thursday said it has reversed course on ex-CEO Leo Apotheker's decision to explore a spinoff of its giant PC arm.

The idea to spin off the business was part of an effort to focus on high profit-margin products and services. But ultimately it appeared that HP listened to customers who like the idea of buying hardware and software from one company, and decided that PCs offer a way to sell higher-margin offerings to corporations. In addition, the $40 billion business gives HP the sort of heft that allows it to buy parts in bulk and get a cost advantage over competitors.

Results from some chip companies this week, however, highlighted sectors where component demand is soft. Texas Instruments, which makes chips for the communications, automobile and wireless industries, said quarterly sales dropped 7% year over year to $3.5 billion while profit declined 30% to $601 million.

Results for the company, which completed the purchase of National Semiconductor during the quarter, were greater than expected, noted CEO Rich Templeton in a statement, adding, however, that "economic uncertainty continues to weigh on demand in almost every major market segment in which we operate."

The most optimistic vendor financial news of the week, as usual, came from the enterprise arena. SAP reported Wednesday a 14% year-over-year rise in total revenue for the third quarter, to 3.41 billion ($4.6 billion), while software sales jumped 28% to 841 million. Net profit skyrocketed 150% to 1.25 billion ($1.74 billion) as the reduction of provisions for copyright litigation with Oracle added 454 million to the figure.

Reprinted with permission from Story copyright 2014 International Data Group. All rights reserved.
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