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Wall Street Beat: Enterprise trumps consumer IT sales

Marc Ferranti | Feb. 25, 2011
Repeating what has been a familiar pattern for the past six months, tech earnings and market forecasts this week show that while enterprise IT sales, especially for software, are booming, consumer demand for PCs is flagging.

FRAMINGHAM 25 FEBRUARY 2011 - Repeating what has been a familiar pattern for the past six months, tech earnings and market forecasts this week show that while enterprise IT sales, especially for software, are booming, consumer demand for PCs is flagging.

Salesforce.com Thursday reported healthy fiscal fourth-quarter sales, which increased 29% from the year-earlier period to $457 million. The company, whose tagline is "the enterprise cloud computing company," raised its forecast for the fiscal year as its charismatic CEO, Marc Benioff, crowed about the company's outlook.

"The current outlook puts salesforce.com on track to be the first enterprise cloud computing company to report more than $2 billion in revenue," Benioff said in a statement. "While it took us a decade to achieve our first billion dollars, we anticipate reaching $2 billion just three years later."

The profit figure for the company's fourth quarter did not look so good. Net income fell to $10.9 million or $0.08 per share, from $20.4 million or $0.16 per share a year earlier. However, the decline was mainly due to stock-based compensation and other one-time costs. Excluding those charges, Salesforce's EPS was $0.31, handily beating the consensus $0.27 expectation of analysts polled by Thomson Reuters.

Salesforce shares midday Friday were up $4.99 to $139.31.

CAD and CAM software maker Autodesk also reported healthy fiscal fourth-quarter results Thursday. Revenue increased 16% year-over-year to $528 million. Profit increased from $50.1 million to $61.6 million.

"We closed the year with solid momentum and double-digit quarterly revenue growth in all of our geographies and all of our business segments," said Carl Bass, Autodesk president and CEO, in a statement. "We're seeing a global increase in demand for 3D design, engineering, and entertainment tools."

Autodesk shares were up midday Friday by $2.44 to $42.87.

The weak part of the tech market, on the other hand, was highlighted this week by Hewlett-Packard, the world's biggest IT company on the basis of sales. HP Tuesday reported sales that were hurt, to a large degree, by weak PC demand.

HP, with its large portfolio of services and hardware and wide geographical market spread, is involved in virtually all areas of IT around the world. The bright spot in the HP report was that earnings for the first quarter of its 2011 fiscal year rose to $2.61 billion from $2.25 billion[b] a year earlier. Excluding one-time charges, earnings per share were up 27% year-over-year, to $1.36 per share, beating the $1.29 per share consensus expectations of financial analysts.

But revenue, hit by a drop in consumer PC sales, was up only 4% year over year, to $32.30 billion, below the $32.96 billion expected by analysts. Since earnings can be affected by the way companies manipulate costs and administrative expenses, sales figures are arguably a better indicator of growth. And in fact, HP lowered its forecast for fiscal year earnings to $5.20 to $5.28 a share on revenue of $130 billion to $131.5 billion, from its prior expectation of $5.16 to $5.26 per share on revenue of $132 billion to $133.5 billion.

 

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