By Nathalie Tadena
TAKING THE PULSE: While information technology spending remains
muted amid a challenging global macroeconomic environment,
businesses' continued investment in cloud services remains a bright
growth spot for major software companies. Earlier this month,
technology research firm Gartner Inc. reported worldwide
information technology spending is on pace to reach $3.6 trillion
this year, a 3% increase from last year. Gartner reported there has
been little change in business confidence and consumer sentiment in
the past quarter and noted the short-term outlook calls for
continued cautious IT spending.
COMPANIES TO WATCH:
International Business Machines Corp. (IBM) - reports July 18
Wall Street Expectations: Analysts polled by Thomson Reuters
expect IBM to report a profit of $3.42 a share and revenue of
$26.31 billion. In the same period last year, the company posted a
profit of $3 a share and operating earnings, which exclude
retirement-plan costs and amortization, of $3.09 a share. IBM
reported revenue of $26.67 billion last year.
Key Issues: IBM has benefited from its push toward
higher-margin, complex businesses such as business analytics, and
away from crowded fields where companies can compete on price only.
While that bet has been paying off, worries have emerged the
macroeconomic environment is hurting spending on technology, and
the company's revenue has been lighter than expected for the past
couple of quarters. The hardware division has seen two consecutive
quarters of revenue declines and the company has warned that the
division would likely have a tough comparison in the second
quarter. In a recent note, UBS said it expects IBM to achieve its
2015 road map, but noted revenue growth could continue to
disappoint as services and Unix technology sales come under
pressure.
Microsoft Corp. (MSFT) - reports July 19
Wall Street Expectations: Analysts project Microsoft to report
fiscal fourth-quarter earnings of 62 cents a share and revenue of
$18.14 billion. A year earlier, Microsoft reported earnings of 69
cents a share and revenue of $17.37 billion.
Key Issues: Microsoft has been transitioning customers to cloud
services and its forthcoming Windows 8 operating system, which is
designed to work on traditional PCs and mobile devices and is
critical to the company's future as it looks to better compete in
the fast-growing mobile market. However, Microsoft still needs
sales of its flagship products to remain robust. Continued strength
in sales of its Office suite of products to corporate customers has
helped cushion the company from the impact of slumping personal
computer sales. The software heavyweight disclosed earlier this
month that it will record a $6.2 billion goodwill write-down in its
online services division in the quarter, connected to its 2007
acquisition of online-advertising agency aQuantive Inc. for $6.3
billion. Microsoft said while the online-services division has been
improving the company's expectations for future growth, profits are
lower than previous estimates, which led to the write-down.
VMware Inc. (VMW) - reports July 23
Wall Street Expectations: Analysts expect VMware to post a
per-share profit of 66 cents and revenue of $1.11 billion. In the
same period of last year, the company recorded earnings of 51 cents
a share, or 55 cents excluding stock-based compensation, tax
adjustments and other items. VMware reported revenue of $921.2
million last year.
Key Issues: VMware, which is majority-owned by storage vendor
EMC Corp. (EMC), dominates the market for virtualization software,
which allows users to run multiple computers' operations on a
single machine, a key step in cloud computing. Customers that had
turned to the company for software to virtualize their information
systems are now buying software to build applications and run their
enterprise. The company's core-virtualization software VSphere has
continued to perform well in competition with software from
Microsoft, Oracle and open-source products. However Wunderlich
Securities, which recently cut its estimates and price targets on
VMware, noted the company experienced "numerous late-quarter
push-outs" in the latest period. The firm continues to see VMware
as a "key element in the deployment and management of
next-generation data center infrastructure."
Citrix Systems Inc. (CTXS) - reports July 25
Wall Street Expectations: Wall Street predicts Citrix will
record earnings of 59 cents a share and revenue of $613 million. A
year earlier, Citrix posted a per-share profit of 43 cents, or 57
cents excluding stock-based compensation and other items, and
revenue of $530.8 million.
Key Issues: Citrix, which competes with VMware in the
virtualization space, has posted double-digit revenue gains over
the past two years as its desktop-solutions business, which
includes XenApp and XenDesktop, has seen its growth accelerate due
to the increasing importance of desktop virtualization. In a recent
note, Nomura said Citrix appears to have had a good quarter in the
educational segment in North America, noting large educational
deals helped out its results.
(The Thomson Reuters financial estimates and year-earlier
figures may not be comparable due to one-time items and other
adjustments.)
-Write to Nathalie Tadena at nathalie.tadena@dowjones.com