| SAN FRANCISCO
SAN FRANCISCO Oct 18 Mobile may be the future
of technology, but even with the worldwide proliferation of
high-powered devices like smartphones and tablets, some
companies are struggling to maintain consistent revenue streams.
Earnings disappointments this week from Intel Corp,
Microsoft Corp, Google Inc and AMD
underscore how Silicon Valley, both the old guard and new, is
struggling to profit from consumers' waning love affair with the
stalwart PC and infatuation with mobile -- the most significant
tectonic shift in the industry since the advent of the Internet.
That bodes ill for companies reporting next week that are
highly leveraged to mobile advertising and services -- most
famously Facebook Inc, which raised a tumult by warning
about over-inflated expectations of its mobile business just
before its seminal IPO.
Amazon and Apple Inc are expected to fare
better, analysts say. Apple, which reports Thursday, is
struggling with capacity constraints and supply hiccups -- but
analysts contend that's a good problem to have because it's
spurred by raging mobile hardware demand.
Amazon and eBay Inc, meanwhile, are succeeding in
reaching consumers through mobile devices, particularly Amazon
with its cut-rate Kindle Fire tablets. About 800,000 shoppers
made their first-ever eBay purchase through a mobile device.
But others are struggling.
"Companies are realizing that it is not easy to find a
formula that works with mobile," Gartner analyst Carolina
Milanesi said. "Mobile is not proving to be as straightforward
as people thought."
Signs that some of the most innovative of today's Silicon
Valley titans are struggling with how to make money off mobile
users come at a bad time for an industry already struggling with
a worsening macroeconomic environment.
The biggest stunner was perhaps Google, which shed more than
$20 billion of market value after it reported that its core
advertising business had slowed. Critics said it was no anomaly.
"Click prices declined for the fourth consecutive quarter
after rising for eight consecutive quarters before then. That's
a negative. This is the mobile problem," said BGC analyst Colin
Then there is Zynga, the poster child for mobile transition
woes. In 2011 the casual games maker was a consumer Internet
darling. In 2012, it has cut its outlook twice and lost
three-quarters of its market value amid a lack of mobile hits,
leading analysts to warn of massive layoffs.
Google CEO Larry Page, however, argued the shift represented
a long-term opportunity.
"We're really starting to live in a new reality," he told
analysts on a conference call. "It will create a huge new
universe of opportunities for advertisers, where they ... will
be dynamically adapting across a whole bunch of different
devices, to reach the right audiences at the right time."
FROM BAD TO WORSE
Perhaps hardest-hit are Intel and others closely tied to the
PC chain. Intel's weak outlook for the fourth quarter ended any
hopes the PC market would pick up at year's end. While Intel
dominated that space in its prime, in smartphones its market
share is less than 1 percent.
Intel's one-time rival AMD is in even worse shape, saying
this week it will cut 15 percent of its staff -- more than 1,600
people -- as part of yet another restructuring to cut costs
while it tries to figure out its future.
On Thursday, Microsoft revealed a 22 percent dive in
quarterly profit as sales of computers running its Windows
operating system dipped.
Marvell, yet another chipmaker being battered by the lagging
PC market, on Thursday cut its revenue outlook by as much as 10
percent as its customers in the storage business suffered.
Those doing best are the one with an established foothold in
mobile, having figured it out years earlier.
Verizon Communications posted a record quarterly
profit on the strength of the wireless business it co-owns,
which came largely from demand for the iPhone.
Apple's ubiquitous handset even figured in the blockbuster
$20 billion purchase of a majority in Sprint Nextel Corp
by Softbank Corp. Softbank, the first to offer the
phone in Japan, was said to admire Sprint's efforts to bring the
device to its own network.
The memory maker SanDisk also easily beat
expectations for the third quarter, as demand for chips to be
used in smartphones and tablets drove up pricing.
"It's just one of the areas of strength left in the
semiconductor market," said RBC Capital Markets analyst Doug
Freedman of the NAND chips SanDisk makes for mobile.
If technology companies only had to deal with a platform
transition, that would be one thing. The problem is they are
struggling with that transition in the face of a weak economy,
when technology upgrades are often the first budget line item to
be cut and consumer spending crumbles.
"The first two months of the quarter were very nice, but it
seems like there was some macro undercurrent in the third month.
It did not just start with Microsoft but Google too, and also HP
and IBM," said Trip Chowdhry, analyst at Global Equities
Research. "It seems like the macro conditions certainly
deteriorated in the third month, and no tech company will be
immune to it."