Intel, IBM Results Show Return of Corporate Computing Demand
Intel Corp. (INTC) and International Business Machines Corp. (IBM) issued sales and profit forecasts that reflected demand from companies eager to upgrade computer systems left fallow during the recession.
IBM, the largest computer-services provider, boosted its full-year profit forecast, while Intel, the top chipmaker, forecast second-quarter sales higher than analysts predicted. VMware Inc. (VMW), EMC Corp. and Juniper Networks Inc. (JNPR), three other business-technology providers, also met or topped analysts’ projections.
The spate of results suggests that after the recession ended in 2009 a rebound in demand may be gathering steam. Companies are outfitting data centers capable of delivering storage, software and other computing tasks over the Internet. The global market for such cloud-related services may more than double to $148.8 billion in 2014 from $58.6 billion in 2009, according to researcher Gartner Inc. in Stamford, Connecticut.
“The product replacement cycle is finally occurring after the downturn of 2008,” said Michael Yoshikami, chief investment strategist for YCMNet Advisors in Walnut Creek, California. “The earnings in all of these companies reflect the fact that businesses are spending again.”
Companies curtailed computer and software spending during the recession, which stretched from December 2007 to June 2009. The belt-tightening crimped sales at Intel, Microsoft Corp. and other technology bellwethers and sent the Nasdaq Composite Index (CCMP) to a more than six-year low in March 2009.
Intel’s current-quarter revenue will be $12.8 billion, plus or minus $500 million, the company said yesterday. That compares with $11.9 billion, the average of analysts’ projections compiled by Bloomberg. IBM’s operating earnings will be at least $13.15 a share this year, higher than a previous projection of at least $13 and the $13.08 average estimate of analysts.
First-quarter net income rose 29 percent to $3.16 billion, or 56 cents a share, from $2.44 billion, or 43 cents, a year earlier, Intel said. Analysts had estimated profit of 46 cents. Sales increased 25 percent to $12.8 billion, compared with an average prediction of $11.6 billion.
Intel rose $1.55, or 7.8 percent, to $21.41 at 4 p.m. New York time in Nasdaq Stock Market trading. IBM fell 65 cents to $164.75 in New York Stock Exchange composite trading.
IBM’s sales last quarter climbed 7.7 percent to $24.6 billion, topping projections, as software, hardware and services revenue jumped. Equipment sales climbed for the fifth straight quarter as customers continued to upgrade after IBM released its Power7 server-computer system and a new mainframe last year.
VMware, the biggest maker of programs that let computers run multiple operating systems, reported profit excluding certain costs of 48 cents a share. That exceeded the 42-cent average of projections compiled by Bloomberg. Sales rose 33 percent to $843.7 million, the Palo Alto, California-based company said. Analysts on average estimated $814.5 million.
Customers are snapping up VMware products that help make their servers -- computers used to run websites and networks -- into multitasking machines that can operate several different applications. Its gains also reflect an expansion into new businesses, including storage and desktop software.
VMware, EMC, Juniper
“They released 18 new products last year, and here we are almost six months later,” Robert Breza, an analyst at RBC Capital Markets in Minneapolis, said in an interview. “You’re starting to see the new products penetrate the customer base.”
EMC, the world’s biggest maker of storage computers and the majority owner of VMware, posted per-share profit, excluding some costs, of 31 cents, meeting analysts’ average estimate. Sales jumped 18 percent to $4.61 billion, topping estimates, as companies upgrade their storage systems.
EMC, based in Hopkinton, Massachusetts, climbed $1.24 to $27.96. VMware rose $11.93, or 14 percent, to $97.90. VMware shares had fallen 3.3 percent this year before today.
Technology stocks rallied as the reports spurred optimism for other companies’ earnings prospects. Salesforce.com Inc. (CRM) climbed $11.55, or 8.9 percent, to $142.08. The Nasdaq Composite Index posted its biggest gain since October, rising 2.1 percent.
Juniper, the No. 2 maker of Internet-networking equipment, reported first-quarter profit that matched analysts’ estimates. The results were buoyed as Internet and telecommunications service providers purchase gear to handle the flood of data on smartphones and computers running bandwidth-hungry videos.
Juniper rose 79 cents to $39.26. The shares of the Sunnyvale, California-based company have climbed 6.3 percent this year.
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