SAN FRANCISCO (Reuters) - International Business Machines, a bellwether for the global enterprise IT sector, raised its outlook for fiscal 2012 earnings, defying worries about how crumbling corporate tech-spending may erode the bottom line.
Qualcomm Inc, also reporting on Wednesday, missed quarterly revenue and earnings targets and pulled back on estimates for mobile device shipments in 2012.
And EBay Inc rounded out major technology-sector earnings with better-than-expected quarterly results. It stuck to its full-year forecasts, seemingly averting a major hit from Europe’s woes.
“IBM’s miss on the top line is related to the macro conditions. It suggests that revenue will be a challenge for all technology companies. Most technology companies close their big deals in the last weeks of the quarter. Only the first month of this quarter was okay. The last two months were terrible.
“This weakness is a buying opportunity for stocks like IBM, HP, Apple, Google and VMware. They are getting impacted by macro-economic conditions. But there is no market-share loss. You should buy stocks like this when times are bad and use them as a buffer.”
“They did better on margins, expenses and share buybacks. So they delivered EPS upside. We continue to think that that is going to be challenging to continue to deliver upon, in the face of revenue deterioration.
“They’re big, so there’s limited opportunities. Two, currency headwinds were much greater than what they forecasted. And three, 60 percent of their revenue come from aboard.”
“I know they missed on the top line, but a lot of that is currency. I don’t think a lot of the people who forecast are all that great about figuring out the currency equation.
“The headline here is really margins. I expected them to be more in-line with last year. For example, Global Technology Services was 36.3 percent and last year it was 34 percent. It’s really hard to manage a bench of people and get money out of them. Another example was Global Business Services. That came in at 30.7 and last year it was 28.9.
“The only area where I am kind of concerned is hardware, because I see the margins declining.”
RICHARD SICHEL, CHIEF INVESTMENT OFFICER, PHILADELPHIA TRUST
“It’s very nice that they beat expectations on earnings. I would say the look-ahead is really what investors are looking for. You get a very credible forecast this way, and what they said was more positive than how people have been feeling lately.”
“They modestly missed on the revenue line, partially due to forex, and slightly on software hardware revenue.
“But the big message is they beat EPS handily and they’re raising the full-year EPS target, and that’s probably enough for the stock to keep working. It’s a sign that this company can keep executing despite the revenue headwinds they have.”
“The slight miss and slight guide-down for the September quarter was generally about as expected. The company reassured on the other hand that the ramp in 28-nanometer chips is happening and they expect a strong December quarter.
“They said that since June 24, they have repurchased about $617 million worth of stock. The other positive thing is the ASPs of devices shipped in the March quarter, on which they recognized royalties in the June quarter, were much higher than what people and the company had estimated. That’s good news in the long run as well.”
“It’s a mess, well below expectations on revenue guidance, and chip sales much lower than people expected. It could be a slowdown in demand, it could be a delay in the iPhone 5. It could be 28 nm supply.”
“The numbers suggest strength in the Marketplaces business in the quarter. So I think some of the initiatives in the last couple of years have definitely helped. The biggest change is really fixed price.
“International was fairly strong, they actually saw an acceleration in the international GMV for Marketplaces. The quarter was pretty solid across both Marketplaces and payments and they maintained guidance over the year.
“This quarter will help reinforce what management has been trying to say for a while now, that the turnaround in Marketplaces is sustainable.
PayPal had “impressive growth. The total revenue number was a little bit light of what we were expecting. But they did also mention that they’re now expecting Ebay and Paypal mobile to each do $10 billion in volume in 2012. So there were some positive comments in terms of PayPal opportunity. I’m sure not that the flightiness on the payments number will detract from the long term opportunity there.
“Guidance was a bit little bit below the Street’s. I think people had anticipated that there could have been some weakness there, particularly with the Euro depreciation which really began in earnest in May. As we look forward now, I think guidance has remained conservative. Consensus is at the high end of the range. So I think most of those factors are already embedded within current guidance.” (Reporting by Malathi Nayak, Alexei Oreskovic and Noel Randewich in San Francisco and Jim Finkle in Boston)