Wall Street Beat: Software results temper bad news on PC front

IDG News Service - Disappointing earnings reports this week from Hewlett-Packard and Dell were offset by more encouraging results from software makers, confirming forecasts for general trends in IT spending this year.

As economies around the world continue to recover in a faltering manner from the Great Recession and 2008 collapse of the financial sector, industry watchers expect software, especially enterprise products, to be a bright spot. Hardware is under more pressure than software, because it is easier to put off PC purchases than halt a strategic rollout of software that a company has committed to, analysts say. But natural disasters have exacerbated problems for PC makers.

Salesforce reported Thursday that total revenue for its fourth quarter was US$632 million, an increase of 38 percent year-over-year. Though the business software company lost $4 million in its fourth quarter, compared to a profit of nearly $11 million a year earlier, the dip was attributed to approximately $94 million in stock-based compensation and other one-time expenses. Analysts are therefore focusing on the strong sales. The sales gains and customers wins reported by the company are reassuring market watchers that the days of high-flying growth for the company, which jumped into the cloud-based software arena early on, are not over.

"CRM's January upside in cash flow, customer wins and the highly approximate 'calculated billings' figure should dismiss fears that 2011 marked the end of the SaaS, platform and social enterprise road for the firm," said Canaccord Genuity technology analyst Richard Davis, who reiterated his "buy" rating and $170 price target on the company.

Salesforce shares jumped $9.89, a whopping 7 percent, to $141.62 in early morning trading Friday.

Autodesk, the maker of 3D design, engineering and entertainment software, also said Thursday that it had a good quarter. The company generated $592 million in sales for its fourth quarter, a 12 percent year-over-year increase. Earnings rose from $61.6 million to $72 million. The results beat analyst expectations, as polled by Thomson Reuters, by 7 million on the sales side and by $0.02 in earnings per share. It was the eighth consecutive quarter that the company exceeded analyst expectations.

Privately held open-source CRM (customer relationship management) vendor SugarCRM, a Salesforce competitor, earlier in the week said that in its fourth quarter, billings jumped by 92 percent year over year. The company, founded in 2004, was net cash positive for the full year 2011, driven by strong 67 percent top-line billings growth. As a private company, SugarCRM is not subject to the same reporting rules of publicly held companies. As a much smaller company than the industry bellwethers, it's also easier to achieve high growth rates. Nevertheless, its growth is in line with analyst forecasts for a solid year for enterprise software.