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It’s the heart of financial reporting season and what have we learned so far? The recession is obviously taking a bite out of company revenues, but for the most part technology companies appear to have made the necessary adjustments to their operations to stem losses and have pulled off a few surprises.
Intel led the way Wednesday when it reported stronger than expected results, and helped the Dow Jones Industrial Average to its best gain in three months. Intel said computer makers had boosted their demand for chips in the second quarter, and demand from consumers was particularly strong in Asia. The increased demand led to $8 billion in sales in the quarter, up 13% from the first quarter. Intel Chief Executive Paul Otellini described it as the company’s best second quarter growth since 1988.
More importantly Intel predicted revenue would improve further in the next quarter, as well as profit margins.
The Intel news was followed Thursday by results from two other tech bellwethers, IBM and Google, and once again the picture was promising.
IBM said its second quarter profit rose 12% largely as a result of measures it took to fine-tune its operations. IBM said revenue declined 13% in the quarter from $26.8 billion to $23.3 billion, but it managed to earn a profit of $3.1 billion or $2.31 a share, compared to $2.77 billion, or $1.97 per share, from the year ago quarter.
Looking ahead, IBM said it expects to make further gains for the remainder of the year and predicted earnings of at least $9.70 per share, up from its previous estimate of $9.20.
And rounding out the results was Google which reported revenue actually inched up 2.9% in the second quarter to $5.52 billion. Profit rose 19% in the quarter compared to the year ago quarter.
There are a couple of insights to be gained from the results so far. The first is that the tech giants seem to have adjusted their business models to cope with decreased revenues in certain areas, and some like IBM have actually managed to increase profits by focusing on higher margin businesses. The second is that the tech giants appear to be signaling an end to the downside of the slump and are, in fact, preparing for an up turn.
There are no guarantees, of course, but the results are definitely cause for optimism.
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