The PC market isn't the only sector to note its first decline since the dot-com bust. According to the Consumer Electronics Association (CEA), consumer electronics in general is on pace to record its first annual drop in revenue since 2001, the same year the PC market also recorded its last decline prior to 2009.
Revenues are expected to be about $165 billion by the end of the year, down about 7.7 percent from 2008. However, it's not because consumers have reduced their spending. Instead, the CEA blames the lower revenue on lower product prices. In fact, CE spending as a percentage of all durable goods is as high as it has been in 50 years, TGDaily reports.
That might come as little consolation to CE manufacturers unable to cash in on consumer spending, but Blu-ray could turn that around. Despite falling prices of Blu-ray players, the CEA predicts unit shipments to reach nearly six million, a whopping 112 percent jump. That would push Blu-ray revenue over the $1 billion mark, a 48 percent increase over 2008.
IBM this week announced its second-quarter 2009 results, noting diluted earnings of $2.32 per share compared with diluted earnings of $1.95 per share in the second quarter of 2008. That's a year-on-year increase of 18 percent, and according to IBM, the highest for any first, second, or third quarter in the company's history.
"As a result of our strategic transformation, we have a very strong business model that is delivering superior earnings, cash, and client value," said Samuel J. Palmisano, IBM chairman, president and chief executive officer.
Looking forward, IBM said it expects full-year 2009 earnings of at least $9.70 per share, up from its previous expectation of $9.20 per share. In addition, the company said it expects full-year 2009 pre-tax income for its Software segment to grow by double-digits and reach somewhere around $8 billion.
Dell’s plight in recent times is well documented: plunging demand, layoffs and factories closing down. For good measure, it has Acer breathing down its throat. Acer is currently the third largest PC manufacturer in the world, but its rise to the number two slot, currently occupied by Dell, is a mere formality now. Though Dell still doesn’t appear to have found a way to contain Acer, its CFO Brian Gladden believes the PC maker may soon be out of its sullen misery. He said that demand for Dell products, though still inconsistent, seems to have stabilized. He expects Dell’s earnings to be a bit better when it declares its second-quarter earnings in August.
Another first-quarter revenue report, and another loss, this one from Nvidia. According to the report, the GPU chip maker's revenue slid 42 percent from last year, posting a net loss of $201.3 million, or 37 cents per share. That's a big change over last year when Nvidia posted a profit to the tune of $176.8 million, or 30 cents per share.
But hey, it seems everyone's numbers are down, and for Nvidia, analysts were anticipating worse numbers. While Nvidia's revenue of $664.2 million is a far cry from the $1.15 billion it posted last year, Wall Street had Nvidia pegged at $534.4 million, undershooting by $130 million.
To help cope with the recession, Nvidia has begun cutting back on its inventory, a method which seems to be working so far. Inventory was scaled back from 144 to 64 days sequentially, CNet reports, and revenue grew 38 percent sequentially from last quarter.
"We made good progress managing expenses and significantly reducing inventory," said Jen-Hsun Huang, CEO of Nvidia.
What a difference a year makes, particularly for Ebay, who received considerable flack from its membership over a series of new policies introduced. At one point, users had become so incensed over the policy changes, which included increased listing fees and alterations to the feedback system, that sellers united for a week long boycott. By some estimates, auction listings dropped by 13 percent during the boycott.
But that's old news, and this week the auction site beat Wall Street expectations on earnings and revenue, which analysts attribute to cost cuts and continued growth in both its Skype and Paypal ventures. Year-to-year Paypal revenue spiked 11 percent, with Skype doing even better and reporting a 21 percent increase. News of the better than expected earnings sent shares of Ebay up over 8 percent today.
Not all the numbers were as favorable, however, with Ebay posting a first-quarter net profit of $357 million, or 28 cents per share, down from $460 million, or 34 cents per share a year prior. Revenue was down 8 percent to $2.02 billion, but still above the $1.95 billion expected.
Having completed its metamorphosis into separate design and manufacturing firms, AMD probably feels as though a major weight has been lifted from its shoulders. However, the company still has some financial ground to make up. On the bright side, AMD's first quarter revenue of $1.77 billion remained flat (rather than tumbling backwards) compared to the fourth quarter of 2008. However, it also represents a decrease of 21 percent compared to the first quarter of 2008.
"AMD’s sequential microprocessor unit and revenue growth in difficult economic conditions demonstrate we can grow in an environment where customers are looking for maximum value," said Dirk Meyer, AMD president and CEO. "We delivered on a number of important priorities in the first quarter. We launched GLOBALFOUNDRIES, maintained our cadence of new product and platform introductions, and made solid progress on our restructuring activities. The result is a more nimble AMD, capable of achieving long-term success based on our strengths designing and integrating industry-leading computing and graphics technologies."
Despite turning in a $416 million first quarter loss, Meyer said AMD is "well positioned" as people have become more discerning for paying only what they need. Moving forward, the chip maker plans to switch over completely to 45nm this quarter and expects a positive cash flow for the second half of 2009.
It's turning out to be a rough month for IBM, who in recent weeks looked like it was going to acquire Sun Microsystems for $7 billion, but lost out to Oracle once takeover talks between big blue and Sun broke down. Had the deal gone through, IBM and Sun would have accounted for about 65 percent of the market for server computers running Unix and 42 percent of the total server market. And maybe better revenue numbers.
Instead, IBM posted an 11 percent drop in its quarterly revenue at $21.7 billion, which was less than Wall Street was expecting, who had forecast $22.6 billion. Net profit for the quarter also dropped 1 percent to $2.3 billion from $2.32 billion one year ago, however this was viewed more of a postive as Wall Street had been expecting a bigger drop in profits.
"These were decent results in light of the challenging economy. Certainly the top line is being impacted by the weak economy," said Andy Miedler, analyst at Edward Jones.
Despite the drop in revenue, IBM has been holding together well when compared to other technology companies. This can be attributed to putting a greater focus on software and services, resulting in a more profitable revenue mix than it had once been. And according to IBM, the company's full-year profit outlook is ahead of pace.
As for losing out to Oracle on the Sun deal, IBM's Chief Financial Officer Mark Loughridge said, "We've been competing with Sun, we know Oracle inside out. They now have the same address and same mail box, but we're talking about the same team that we've been competing against for some time and winning on the field."
It almost seems like common sense, but 37signals' Jason Fried had some specific words for those in attendance at this year's Future of Web Apps conference in Miami, Florida: the future is not free.
Continuing on, his point is that companies need to turn away from the business model of pump-and-dumping free applications to a gleeful audience. Open-source and free software might be an excellent means for attracting attention and eyeballs to a product, but now is not the time to pack alternate revenue strategies around these concepts. Advertising and other extraneous revenue add-ons are a distraction, argues Fried. It's time to shift back to a meat-and-potatoes business model, and that involves selling a product that contains enough quality to make an audience want to pay for it, even given the current economic difficulties.
That said, there's still room for free in some capacity--read on to find out where Fried thinks free applications can exist!
Nvidia this week revised its fourth-quarter outlook saying its revenue is expected to plunge at least 40 percent sequentially, and possibly as high as 50 percent. The graphics chip maker blames the revised estimate on a one-two punch of weakening end-user demand and inventory reductions by channel partners. Nvidia didn't have much more to say on the matter, other than that no conference call will be held regarding the update and we'll have to wait until February 10, 2009 when Nvidia reports its financial results for the fourth quarter of fiscal 2009.
While everyone seems to be struggling in a weakened economy, and Nvidia in particular is coming off a year plagued with negative PR over GPU failures, the company appeared to be righting its ship by landing some big contracts. Earlier reports showed several global top-tier notebook vendors jumping on board Nvidia's 9400M graphics, including Apple, who ditched Intel in favor of Nvidia to supply the graphics chipset for the refreshed MacBook line. But this latest revenue warning trumps other big players in the tech market, such as AMD, Intel, and LSI who recently offered revised guidance ranging from 15 to 25 percent lower sequentially.
Meanwhile, we're still waiting for Nvidia to make good on its promise to "open a can of whoop ass."
AMD's financial struggles have been well documented throughout the past year, but it isn't the only chip maker feeling the sting from a lackluster global economy. And while the technology world is abuzz at CES showing off new gadgets and prototypes, Intel's fourth-quarter warning comes as a sobering reminder that all is not well.
The No. 1 chip maker said it expects just $8.2 billion in revenue for the quarter, representing a disappointing 23 percent drop from the same quarter one year ago, and a 20 percent tumble from Q3. Intel had warned in November that its Q4 results would be less than previously forecast, but at the time, the company still expected to pull in up to $9.3 billion.
Perhaps most disheartening about the less than expected revenues -- for Intel, anyway -- is what impact the netbook industry might be having. The netbook market has exploded in recent months, and it's been Intel's Atom processor that has provided the dynamite. But unlike much higher priced notebooks, these $500 and under laptops don't offer the same attractive profit margin, apparently no matter how well they're selling.