Yesterday, April 17, 2007, IBM, Intel, and Yahoo reported 1st quarter results and held their analyst conferences. You can look at my summaries of the analyst conferences if you would like. See IBM, INTC, YHOO.
Mostly this blog is about revealed trends and their implications for other information technology companies, but first let's look at what was revealed about the companies themselves.
IBM did really well in Asia, but revenues were essentially flat in the United States. In total revenues were up 7% from year-earlier. IBM expects EPS growth to continue at a 10 to 12% annual rate, but that depends on getting the US back on track. Their software and business services segments did best, up 9%, with their hardware segment lagging, with 2% annual growth. Within that segment high-end servers did better than low-end servers.
Intel had revenues down 1% from a year ago and down 9% sequentially (Q1 is usually a sequentially down quarter for them). But they seem to have dodged the AMD bullet. If AMD had continued to gain market share, Intel would have seen lower revenues. Flash products are still losing money for them. Q2 to be down about the typical seasonal 4%. Some remarks about selling to systems integrators seemed in the direction of saying Intel can still play hardball despite the AMD v. Intel lawsuit on anti-competitive practices. Unit production costs of microcontrollers fell faster than average sales prices (ASPs) fell, so margins were up. Server chip ASPs took a bigger hit than desktop/notebook ASPs, probably because AMD is more competive in server chips.
Yahoo revenues were up 7% over year-earlier, and down only 2% sequentially. Considering the difference in Q4 v. Q1 advertisement, that is not too bad. But it certainly does not show any market share gain against Google (See my GOOG page). If Google gained share this last year (and it almost certainly did) it was at the expense of Microsoft. Yahoo execs characterized the online ad market as going through big transitions.
Those big transitions are the news for 2007 and 2008 against which everything else must be measured. It isn't just MySpace and YouTube. Nor just the Internet. The whole global information processing structure is going through one of those periods of rapid transformation that may create totally new winners and thrust some of yesterday's winners into the loser column.
Chip and hardware makers will benefit as ever more storage and processing power is needed. While desktop processing and storage is more than adequate at this point, servers are barely keeping up, despite dual and quad processors and virtualization technology. Sun, Rackable, Dell and others are doing their best, but don't be surprised if some relative unknowns make breakthroughs in the next few years. AMD and Intel could fly if they compete on technology instead of price (which Intel signalled it is willing to do; AMD was doing it until mid 2006 and would probably be happy to return there). Innovators like Marvel and Maxim should do well -- if they make the right innovations.
While Google looks set to remain king of the online ad roost for the short term, that does not mean a swarm of innovators aren't going to be stepping up in the ranks. Not all the money is directly in ad serving, as Akamai has proven.
Asia is set to become a world leader again. With Japan, China and India all on the upswing, the United States will be technologically challenged. This will be partly offset by globalization. Innovators will do well whether in the US or India; laggers will be crushed.
I expect chip makers in general to have a relatively good Q2 and a great Q3. Server-focussed computer makers will do better than client-focussed makers. New media companies will continue to emerge rapidly. This means that venture capitalists will have a substanial advantage: the real money is made (or lost) before the IPO is set up. But stock market investors can also do well by spotting companies that are good at buying small innovators before the markets see their true value. Yahoo and IBM are both in that class.
You can check out the list of companies I do analyst conference summaries for at www.openicon.com/confsums/listcos.html