Wall Street Beat: Hardware hits headwinds, software picture clears up
PC market slows but enterprise software shows resilience in face of economic uncertainty
IDG News Service - While hardware and components makers face economic hurdles, the picture for software is getting brighter, according to earnings reports from major vendors and mid-year market research polls.
Vendors and analysts lay much of the blame for the economic headwinds facing IT companies on Europe's debt woes. The debt burden on overextended banks and the huge sovereign debt in southern European countries as well as a recession in several E.U. nations has created an environment in which businesses are pulling back certain IT purchases, according to industry insiders.
For example, in its disappointing quarterly earnings announcement Thursday, outsourcing services company Infosys said that the cancellation of a large project in Europe was one reason it experienced slower revenue growth in the quarter than in the year earlier period.
Last week, when data integration software maker Informatica released worse-than-expected preliminary figures for the past quarter, Europe was also to blame.
"After 31 consecutive quarters of consistent results, I am disappointed that we fell well short of our own expectations in the second quarter of 2012. Clearly, we did not adapt as rapidly as we should have to the changing macroeconomic environment, especially in Europe," said Informatica CEO Sohaib Abbasi in a statement.
Slowing growth in China as well as a weak labor and housing market in the U.S. has also worried IT companies. Though no sector is immune from the economic concerns, hardware is getting particularly hit.
Global PC shipments totaled 87.5 million units, a year-over-year decline of 0.1 percent, Gartner said Wednesday. IDC on Wednesday also reported a year-over-year decline of 0.1 percent in worldwide PC shipments. In May, it had forecast 2.1 percent growth.
IDC pointed to a tough economy, competition from smartphones and tablets as well as the expected launch of Windows 8 this year, which may be causing potential PC buyers to hold off purchases.
"These latest results validate IDC's expectation that the second quarter would be a transition period where both economic factors and anticipation for new products in the second half of the year would result in relatively low PC shipment growth," said IDC senior research analyst Jay Chou in the report.
The slowdown in the PC market is affecting the chip sector. Advanced Micro Devices said this week that it expects its second-quarter revenue to drop by 11 percent from the first quarter due to slow sales in China and Europe. AMD had said previously that sales for the quarter ending June 30 would increase by 3 percent sequentially, plus or minus 3 percent.
Economic woes for hardware affect all levels of the component supply chain, including companies like Applied Materials, which makes manufacturing systems for the semiconductor and display industries. This week Applied Materials revised its fiscal year 2012 business outlook due to weaker-than-expected, near-term demand in its semiconductor equipment business.
- Best iPhone, iPad Business Apps for 2014
- 14 Tech Conventions You Should Attend in 2014
- 10 Desktop Apps to Power Your Windows PC
- How to Add New Job Skills Without Going Back to School
- Slideshow: 7 security mistakes people make with their mobile device
- iOS vs. Android: Which is more secure?
- 11 sure signs you've been hacked
- 4 Customers who never have to refresh their PCs again This paper illustrates a common theme: the combination of desktop virtualization and thin client computing helps organizations deliver an up-to-date user experience more...
- Mobile Devices: The New Thin Clients Get essential guidance for understanding the role thin clients plus virtual desktops play in the enterprise today.
- Taking Windows Mobile on Any Device Taking Windows applications mobile has many advantages, but the process of identifying a solution is complex. Learn how to solve this complex problem...
- PaaS - Powering a New Era of Business IT Why PaaS has suddenly become relevant and irresistible to many organizations. Dive into the opportunities and considerations associated with using PaaS from an...
- Redefine Your IT Operations: Remote Office IT Has Never Been Simpler Join us to see why PC Pro named Dell PowerEdge VRTX the "2013 Server of the Year." PowerEdge VRTX may be just what...
- Four Myths of High-Productivity App Dev Debunked Debunk the main myths surrounding high-productivity application development and how both platforms have overcome them. All Hardware White Papers | Webcasts