Microsoft, Xerox Take Earnings Hits

By Kathleen A. Martin  |  Print this article Print

Even powerhouses such as Microsoft and Xerox are feeling the pain of the economic downturn. Technology revenues and profits are under pressure, but not everyone is declaring losses. Sybase, for one, is reporting a record quarter.

The first batch of technology corporate earnings reports of the new year produced a mixed bag of results as even industry bellwethers such as Microsoft and Xerox are feeling the pinch of the global economic slowdown.

Microsoft (NASDAQ: MSFT) reported its first year-over-year quarterly revenue decline since the first stock sale to the public in 1986. In its third quarter, which ended March 31, Microsoft said revenue fell 6 percent, to $13.65 billion, from $14.45 billion. Microsoft reported net income of $2.98 billion, or 33 cents a share — a 32 percent drop from the $4.39 billion, or 47 cents a share, reported in the same period last year. In spite of the earnings announcement, Microsoft stock ended up 10.6 percent at close on Friday and encouraged investor confidence.

Xerox (NYSE: XRX) reported total revenue of $3.6 billion was down 18 percent including a 6 point negative currency impact. The printer company blamed the decline on the recession causing customers to delay purchasing and distributors lower inventory levels.

Xerox’s post-sale and financing revenue was down 14 percent. Equipment sale revenue declined 30 percent or 26 percent in constant currency. "During the first quarter, we saw an accelerated rate of decline in enterprise spending on technology, especially in Europe and developing markets," said Anne Mulcahy, Xerox chairman and chief executive officer.

Lexmark (NYSE: LXK) also did not print money during the quarter. The printer company announced first quarter revenue of $944 million, down 20 percent compared to revenue of $1.18 billion last year as weak global economic conditions negatively impacted demand for both hardware and supplies.

"While [earnings per share] were above our expectation in the quarter, market conditions continue to negatively impact both Lexmark and the overall distributed printing market," said Paul J. Curlander, Lexmark chairman and chief executive officer.

Juniper Networks (NASDAQ: JNPR) net revenues for the first quarter of 2009 declined 7 percent on a year-over-year basis to $764.2 million. "We took aggressive steps to reduce expenses," stated Robyn Denholm, Juniper’s chief financial officer. "The reduction in revenue was a reflection of the current macroeconomic environment and I am pleased with how quickly the team was able to implement cost reductions and deliver on our operating margin and [earnings per share] targets. In addition, we posted strong cash flows from operations and maintained a strong balance sheet. We will continue to take the actions needed in order to align our cost-structure with anticipated revenue levels."

Many analysts say recent moves by Cisco Systems to capture a greater share of the data center marketplace is helping to position Juniper as a stronger alternative to Cisco’s core data networking equipment.

When a company posts their earnings under the title of "Sybase Reports Best-Ever Q1 Results" they are clearly a winner in a sea of less than profitable earnings announcements. Sybase (NYSE: SY) reported total revenue for the first quarter of 2009 increased to $267.5 million from $260.1 million in the first quarter of 2008. License revenue grew to $89.3 million compared to $78.1 million in the first quarter of 2008. Services revenue was $135.0 million, and messaging revenue was $43.3 million in the 2009 first quarter.

Apple Inc. (NASDAQ: AAPL) is in both the winner and loser categories. Earnings exceed Wall Street expectations as the company posted revenue of $8.16 billion and a net quarterly profit of $1.21 billion, or $1.33 per diluted share. These results compare to revenue of $7.51 billion and net quarterly profit of $1.05 billion in year to year comparisons. Gross margin was 36.4 percent, up from 32.9 percent also in year to year comparisons. While it is estimated that AT&T activated 1.6M new iPhones during this quarter, Apple has filed notice to eliminate 1,600 jobs. IT and electronics distributor Avnet (NYSE:AVT) CEO reports that signs are that we are reaching a bottom of the current recession. But revenues and earnings were still declining in the company's most recently quarterly report.

Metavante Technologies Inc (NYSE: MV) posted a first-quarter profit above analysts' estimates. Metavante posted revenue of $40.3 million, or 34 cents a share, compared with $35 million, or 29 cents a share, a year earlier. "We expect profitability to improve slightly as our fourth-quarter and first-quarter cost actions convert fully and our mix improves slightly," said CFO Tim Oliver.

Earnings scheduled for this week include Check Point Software Technologies (NASDAQ: CHKP), Unisys (NYSE: UIS, Office Depot (NYSE: ODP), Sun Microsystems (NASDAQ: JAVA), Websence (NASDAQ: WBSN), Arrow Electronics (NYSE: ARW) and Citrix Systems (CTXS).


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