IBM, he says, should meet expectations for the quarter by delivering per-share earnings of $3.31, slightly better than the consensus estimate of $3.21. On top of that, he expects IBM to raise its guidance for earnings on the year to $13.35 per share or higher. Sacconaghi says IBM may earn as much as $13.60 a share this year, depending on how much it ultimately saves from workforce reductions and a lower tax rate. He says that IBM has beat its consensus in each of its last 15 quarters and raised annual earnings guidance in nine of its last 11 quarters.

All good, right? Sure, but how long can IBM keep this sort of thing going? Certainly not forever, especially in a tough global economy. Revenue growth this year will be difficult to compare to last year, Sacconaghi writes, especially in light of a stronger U.S. dollar, a slowing business cycle in hardware upgrades and a slowdown in services growth over the last 18 months. As such, his estimates for revenue growth are below those of the Street consensus: Where the Street expects IBM to report sales of nearly $112 billion in fiscal 2012, Sacconaghi expects $109.3 billion.

“IBM has benefited from a favorable currency environment, which has boosted the company’s headline revenue growth number, which is likely to reverse and pressure IBM’s reported revenues in the first half of 2012 at current spot rates,” he writes. “While we don’t expect this to lead to earnings misses versus the consensus given that IBM hedges, we believe that revenue estimates need to be revised downwards from current levels.”

• Overall sales at $26.7 billion were $1 billion higher than the consensus and grew 12 percent.

• Profits were $3.7 billion or $3.09 per share, up eight percent year over year.
• Mainframe revenue grew 61 percent, including an 86 percent growth rate in the MIPS business and 12 percent growth in the Power Architecture business.
• Hardware added three percentage points of market share. Here IBM takes a swipe at Oracle, saying that 60 percent of 250 competitive displacements — cases where IBM sells gear that replaces another vendor’s — came in places where old Sun Microsystems machines had been running. This confirms something that Chris Whitmore of Deutsche Bank mentioned in a research note to clients this morning. Expect Oracle to retort sometime soon.
• Software sales grew 17 percent, or 10 percent after adjusting for currency.
• Services revenue grew 10 percent, or two percent after adjusting for the effect of currency. The services backlog — which measures the current value of contracted work underway that will be recognized as revenue in the future — grew to $144 billion, up by $15 billion, or $2 billion after adjusting for currency.
• Gross margin, a key measure of profitability, was 46.4 percent, up from 45.6 percent a year ago.
• IBM got a big boost from foreign currencies which are currently strong against the U.S. dollar, making sales outside the U.S. more profitable than within. Sales in the Americas grew 10 percent while combined sales in Europe, the Middle East and Africa rose 16 percent and Asia sales grew 14 percent; though after adjusting for currency, sales in both of those regions grew only three percent. Overall, revenue got a seven percent boost from benefits from foreign currencies.
• Sales in the BRIC countries — Brazil, Russia, India and China — increased 27 percent, or 21 percent after adjusting for currency.
• Sales in the U.S. were up six percent and in Canada up 11 percent.
• Another dig at Oracle came during the conference call, when CFO Mark Loughridge said that Netezza, the storage concern it bought last year for $1.7 billion, is winning business versus Oracle’s Exadata. Hardware was the one notable weakness in Oracle’s results when it last reported in June. Loughridge crowed that Netezza has an 80 percent win rate against competing hardware.

The branded-currency announced today comes just a couple of months before Facebook is mandating that all social games use Facebook Credits as the default payment system.

A Zynga spokeswoman said the launch of RewardVille has nothing to do with Facebook Credits because there is no real money being exchanged.

Still, it’s hard not to see how the Zynga-branded coins isn’t a ploy for the game-maker to build its brand as Facebook inserts itself more and more into the gaming experience.

The new program, announced today at SXSW, is called RewardVille, which will give players zPoints and zCoins in CityVille, FrontierVille, FarmVille, Mafia Wars, Zynga Poker, Café World, Treasure Isle, YoVille, PetVille and Vampire Wars.

The coins will can be used to unlock exclusive and limited edition virtual goods to apply across multiple games.

The rewards system has multiple layers. For instance, users will be awarded points as they play games. As points are accumulated, users will increase their level. As players level up, they will be rewarded coins.

The coins can be used in any participating game, meaning that if you started off as as a heavy FarmVille user, the coins can be redeemed in CityVille to advance your status. The virtual goods in AwardVille will be exclusive, and cannot be purchased with real money or Facebook Credits.

Limited edition items include the “Stepped Skyscraper” in CityVille or a “Ring of Fire” in FrontierVille, which will help you advance faster in your game. All players who sign up for RewardVille in March will receive one free item per game.

Players will be able to earn as many as 80 zPoints per game or 300 zPoints total in one day.

Zynga’s created a well-polished video on how it works:

As just one example of the scope of Facebook’s influence, the 18,000 attendees, who have hundreds of sessions and panels to pick from over five days, will be subjected to listening to 12 employees of Zynga, the Facebook superstar, on 15 different panels. (Brian Reynolds, Zynga’s chief game designer, appears three times, while a search reveals no Facebook employees on the roster.).

Two other elements will serve as a backdrop to the event.

Apple will hold its much-anticipated event on Wednesday, where it’s likely to unveil a new version of its hugely successful iPad, according to BoomTown’s Kara Swisher. The tech giant undoubtedly is becoming one of the dominant portable gaming giants, as the iPad and iPhone easily replace the need for dedicated gaming devices.

No need for Apple to attend GDC, however, when the unveiling will occur across the street at the Yerba Buena Center for the Arts. So subtle.

Meanwhile, the GDC is commemorating its own 25th gaming conference by featuring a keynote by Nintendo.

But can you believe the company, which doesn’t have a new gaming console even on the horizon, is the one talking about the past 25 years and not what the future has in store?

Other companies with a significant presence include Sony, which will be showing off the new Experia Play phone and its motion-activated Move technology, Electronic Arts and independent mobile-game makers like Rovio, of Angry Birds fame.

However, with social being one of the main ingredients on the menu, we caught up with Alex St. John, a long-time executive in the industry, who has spent the past year and a half coming up with an alternative– he calls it the “anti-social networking platform.”

St. John is the president and chief technology officer of Hi5, which was founded in 2003 as a competitor to Facebook’s social network. With all hope lost on that front, it’s now going up against the company a second time–this time for its games business.

The move is 100 percent anti-Facebook, and there’s nothing subtle about it.

Over the past year and a half, St. John has been building an alternative for social-game developers who fear they may be relying too much on Facebook.

Today, Facebook claims 30 percent of most revenues made within a game by mandating the use of its own virtual currency, called Facebook Credits. Developers often hand over even more money to the social network in order to advertise and draw an audience to their games.

St. John’s ambitions are unnaturally large, and supercharged by the fact that he was able to skyrocket his last company, WildTangent, into the largest casual games network (above Yahoo), where it continues to stand today. (Read our story on WildTangent for background.)

Even more boldly, he’s promising to double or triple the amount of revenues a developer can make when using Hi5 compared versus Facebook.

Here’s the logic:

“If I have the same content, and have better monetization, even if my audience is tiny, I will eventually win because I can buy traffic cheaper than you.”

If you buy that, listen to his two-part plan.

First, there’s SocioPath.

SocioPath (the anti-social network) will enable game developers to provide a home for their games outside of the walls of Facebook.

By using it, they can create a unique URL for the game, and users won’t have to register. To do this, Hi5 clones Facebook’s APIs, and enables users to create profiles on the fly, so they can play with other people immediately. The caveat is that if the gamers want to chat or communicate with others, they’ll have to log in and register.

Otherwise, the auto-registration process creates little to no friction for playing.

Second, there’s SocioPay.

SocioPay offers game-makers a way to monetize. It uses a hybrid of advertising and commerce, a practice St. John mastered at WildTangent (for the record, St. John no longer has any role at WildTangent and doesn’t own any stock).

This model allows developers to continue to sell virtual goods to the three percent of users who are traditionally willing to pay in games, but still monetize the other 97 percent using advertising.

When a user clicks on a virtual good, Hi5 will automatically serve a 15-second video clip. If a user would rather pay, they can skip the ad and enter their payment information.

St. John claims you end up losing about 25 percent of sales because of the ads, but you gain way more in revenue through advertising. Over time, they’ll tweak the ad server, so it knows not to offer an ad if a person has already paid for coins or is likely to. His calculations point to a 200 percent–maybe 300 percent–jump in revenue.

Of course, this isn’t free.

Hi5 will charge developers who want to use SocioPay 30 percent of both commerce and advertising revenues. If the ad server is used anywhere else, like on an individual Web site, the developer can keep 100 percent of the revenues. St. John claims the terms are less onerous than those of Facebook, which takes 30 percent of virtual goods and charges additionally for advertising on the site.

When SocioPath launched in August, it had three social games. It is now live with 116, and launching two to five a week.

This week, for instance, SocioPay launches with five partners–Portalarium: Port Casino Poker; DJArts Games: Bush Whacker; Mososh: Chronicles of Herenvale; Game Insight: Resort World;, and Hit Point Studios: Gunbros.

St. John expects the program to go live in a month after the beta is completed.

Here’s a video of St. John, discussing the the trends of GDC, his decision to join Hi5, and his ambitions for the new game venture (to be a very successful No. 2 behind Facebook).

]]> http://allthingsd.com/20110228/fed-up-with-facebook-hi5-tells-social-game-developers-theres-an-alternative/feed/ 1 http://allthingsd.com/20110216/mobile-world-congress-notebook-battle-of-the-behemoth-booths/ http://allthingsd.com/20110216/mobile-world-congress-notebook-battle-of-the-behemoth-booths/#comments Wed, 16 Feb 2011 19:40:07 +0000 Ina Fried http://mobilized.allthingsd.com/?p=4308 For those who have never been to Mobile World Congress, it is hard to fully describe the scale of Barcelona’s giant cellphone convention.

While the Consumer Electronics Show and other big events feature acres of tiny booths crammed one against another, Mobile World Congress features a different kind of bigness. The show is spread out over eight big buildings in a historic area of town. Every couple of buildings are set several flights of stairs up from the last one, with the final two buildings just a stone’s throw from the grand National Palace.

Connecting the buildings and lining the promenade between them are various smaller trailers and bungalows.

Unlike the cramped booths at CES, the spread-out nature of Mobile World Congress allows even moderate-size companies a good amount of space to show their wares. Even those with bungalows outside a main hall stand a good chance of attracting visitors. Companies that went with that approach included Acer and INQ Mobile, which was touting its new Android phone with quick access to Facebook and Spotify.

That said, some folks’ presence at Mobile World Congress is clearly bigger than others.

One booth that stands out is Google’s first-ever Android booth, tucked in the corner of Hall 8, just inside the entrance.

The two-story pavilion features many of Google’s partners showing Android applications, as well as a place to create one’s own Android mini-me, plus a sushi-bar-style conveyor belt featuring the many phone and tablet designs based on the Google operating system. Among the designs that scrolled by while I was standing there were well-known names such as Samsung and HTC, as well as less-familiar brands such as China’s ZTE and Alcatel, which is new to Android.

Perhaps the pièce de résistance of the booth is a slide that allows children of all chronological ages to relive their youth and glide down from the top floor back to the bottom. The most popular thing, though, was a series of collectible pins being passed out throughout Mobile World Congress by various Android partners. They were a hot commodity, and by Tuesday afternoon most booths were completely out of their supply of pins, placing green candy inside the dishes instead.

While impressive, the Android booth was not the largest by any stretch. One of the more massive setups I saw was the Ericsson booth, which occupied nearly all of Hall 6. A small Sony Ericsson booth was open to the public. Behind a security gate, though, was a massive spread for the many partners of both Ericsson and Sony Ericsson. It featured two bars and two kiosks serving various tapas.

There were meeting rooms and patio tables for more-casual interactions. On display were all kinds of Ericsson technologies ranging from its core infrastructure gear to all kinds of other products and research projects.

A few caught my eye, including a mobile payment section that featured a “Museum of Money” talking about days gone by when people used paper currency with all its flaws. Under glass were such relics as money, piggy banks and counterfeit-detection pens, while Ericsson showed off its many payment technologies.

In another corner, Ericsson was showing off a vending machine that is paid, not with cash or credit card, but via SMS message. Ericsson has a unit that serves as an intermediary between the vendor and the carrier to manage the transaction.

]]> http://allthingsd.com/20110216/mobile-world-congress-notebook-battle-of-the-behemoth-booths/feed/ 0 http://allthingsd.com/20110106/worldwide-it-spending-growth-speeds-up-gartner-says/ http://allthingsd.com/20110106/worldwide-it-spending-growth-speeds-up-gartner-says/#comments Thu, 06 Jan 2011 15:48:55 +0000 Arik Hesseldahl http://newenterprise.allthingsd.com/?p=1436 Research firm Gartner has released its latest forecast for worldwide IT spending in the coming year, and at first glance it looks like good news for tech companies across the board.

The good news is that Gartner has revised its outlook upward. Companies and governments will spend $3.6 trillion on IT this year, which is more than the prior $3.4 trillion forecast, amounting to growth of 5.1 percent. Sounds great, right?

Yes, but it’s complicated, especially from the U.S. point of view. The weak dollar makes the figures look a little better than they are. In 2010, Gartner says, IT spending grew 2.2 percent, but more than half of that–1.6 percent–can be attributed to the devaluation of the dollar against other currencies. Companies and governments spending other currencies can get more dollars for their money, and so this tends to inflate the appearance of growth, Gartner’s Richard Gordon told me.

A weak dollar is generally good news for U.S. companies that do a lot of global business. U.S. products and services look more attractive to non-U.S. buyers. But in cases like this, U.S. companies end up paying more for items that get imported and for raw materials.

That’s not to say there isn’t actual growth. Gartner says spending is picking up fastest on telecom equipment, with computing hardware and enterprise software following close behind.

Spending on discretionary items like IT services and consulting is coming back the slowest. When the economic crisis hit in late 2008 and early 2009 these were the first items on the chopping block, and spending on them is only now beginning to make a comeback.

]]> http://allthingsd.com/20110106/worldwide-it-spending-growth-speeds-up-gartner-says/feed/ 0 http://allthingsd.com/20090519/citi-worst-may-be-over-for-internet-stocks/ http://allthingsd.com/20090519/citi-worst-may-be-over-for-internet-stocks/#comments Tue, 19 May 2009 17:48:47 +0000 Peter Kafka http://mediamemo.allthingsd.com/?p=7512 More fuel for the “things may not be getting worse, and may even be getting a little bit better” meme that I’ve been detecting (or perhaps promulgating ) recently: Citigroup (C) analyst Mark Mahaney notes that the Internet stocks he covers are up an average of 28 percent so far this year while the tech-heavy NASDAQ is only up seven percent and the broader S&P is down two percent.

Big winners so far include Blue Nile (NILE), up 73 percent; Expedia (EXPE) up 68 percent; and Amazon (AMZN) up 44 percent. Moderate winners, comparatively speaking, include Google (GOOG) up 27 percent; eBAY (EBAY) up 21 percent; and Yahoo (YHOO) up 22 percdent.

Here’s the full breakdown of the 16 Internet stocks Mahaney covers (click table below to enlarge):

I usually steer well clear of opining/guessing about stock prices and the like, but I think it’s worth considering Mahaney’s note, both for his explanation and for the potential impact of the stocks’ run.

The explanation: Part of this is basic what-goes-down-must-go-up market yo-yoing–Internet stocks got pummeled worse than the rest of the market last year so it’s easier for them to bounce back. But Mahaney also thinks that most of the stocks he follows are going to turn in the worst performance, earnings-wise, in the quarter we’re in now. Investors like that because it means that things can only get better.

The impact: Remember the old days when public companies could use their shares as currency to acquire smaller companies? Well, we’re not headed back there quite yet. But a sustained rally sure could kick-start the M&A market, which will make things more interesting for the likes of me, at the very least.

[Image credit: joshmadison]

]]> http://allthingsd.com/20090519/citi-worst-may-be-over-for-internet-stocks/feed/ 0 http://allthingsd.com/20090430/ericsson-thanks-a-lot-sony/ http://allthingsd.com/20090430/ericsson-thanks-a-lot-sony/#comments Thu, 30 Apr 2009 12:08:53 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=16653 Telecom equipment maker Ericsson reported earnings this morning, and while the Swedish company is obviously doing better than some of its rivals, it’s not doing all that much better. This morning the company posted a 35 percent drop in first-quarter profit, its financials undermined by its Sony Ericsson joint venture (which reported a loss of 293 million euros) and by customers postponing purchases because their local currency has collapsed. Net profit in the quarter was 1.7 billion kronor ($210 million) compared with 2.6 billion kronor in the same period a year ago.

Now we know why Ericsson declined to offer a specific business outlook for 2009 when it last reported earnings. That said, the company seems to believe that the effects of global recession on its business are limited so far. Investments in wireless networks apparently continue apace, econalypse be damned.

“I think we have had a decent start of the year,” CEO Carl-Henric Svanberg said during a conference call with analysts. “We continue to gain market share. We had several strategic wins, we’re doing good in managed–both networks and managed services. There are some but still limited effects from the economic recession and still I think this is not the time to be too precise and predicting but realize that this is a very unusual time.”

]]> http://allthingsd.com/20090430/ericsson-thanks-a-lot-sony/feed/ 0 http://allthingsd.com/20081211/oracle-another-estimate-cut-ahead-of-earnings-dec-18/ http://allthingsd.com/20081211/oracle-another-estimate-cut-ahead-of-earnings-dec-18/#comments Thu, 11 Dec 2008 19:48:31 +0000 Eric Savitz http://voices.allthingsd.com/?p=6772 Friedman Billings Ramsey’s David Hilal this morning became the latest analyst to cut estimates on Oracle (ORCL) ahead of the software giant’s earnings report for the November quarter, which will be announced after the close on Dec. 18.

Oracle’s forecast for the quarter was for revenue to be up 9-12 percent, or 12-15 percent on a constant currency basis; it projected new license growth of 2-12 percent, or 5-15 percent on a constant currency basis.

Hilal thinks the company will be at the low end of guidance on a constant currency basis, and could miss on an as-reported basis.

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]]> http://allthingsd.com/20081211/oracle-another-estimate-cut-ahead-of-earnings-dec-18/feed/ 0 http://allthingsd.com/20080919/theres-still-trouble-ahead-for-the-tech-sector/ http://allthingsd.com/20080919/theres-still-trouble-ahead-for-the-tech-sector/#comments Fri, 19 Sep 2008 22:12:51 +0000 Eric Savitz http://voices.allthingsd.com/?p=4077 Yes, it sure is nice to see stock prices flashing green. But despite the market’s historic two-day move, there are still reasons to worry about what happens to technology shares over the next several quarters.

There are several negative factors at work here. Start with currency: One of the more eye-opening aspects of Oracle’s (ORCL) well-received earnings report last night was the company’s comment that revenues in its fiscal third quarter ending October will see a serious drag from currency factors. Oracle expects a 10 percentage point swing on a year-over-year basis: Currency boosted revenue by 7 points in the year-ago quarter, but will cut revenue growth by 3 percentage points this year, assuming exchange rates stay about where they are now.

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]]> http://allthingsd.com/20080919/theres-still-trouble-ahead-for-the-tech-sector/feed/ 0 http://allthingsd.com/20080915/iphone-not-so-big-in-japan/ http://allthingsd.com/20080915/iphone-not-so-big-in-japan/#comments Mon, 15 Sep 2008 15:17:51 +0000 John Paczkowski http://digitaldaily.allthingsd.com/?p=4991 Nomura Research Institute once estimated that Apple could sell two to to three million iPhones annually in Japan–about five percent of the market. But that was back in June when iPhone mania was at its peak and the device seemed destined to be a success wherever it was sold.

But Japan is one of the world’s largest and most demanding mobile phone markets. Perhaps even a bit too demanding for the iPhone. According to market-research firm MM Research Institute, Apple (AAPL) sold just 200,000 iPhones in Japan in the device’s first two months on the market.

And now demand is declining. So much so that analysts say sales are unlikely to top 500,000 units, let alone two million. The reason: The iPhone, even with its multi-touch screen and elegant design, pales a bit in comparison to the typical Japanese handset, which boasts not just a high-end color display, but a video camera, GPS and digital TV and electronic currency support as well. Said MM Research analyst Eimei Yokota, “The iPhone is a difficult phone to use for the Japanese market because there are so many features it doesn’t have.”

]]> http://allthingsd.com/20080915/iphone-not-so-big-in-japan/feed/ 2 http://allthingsd.com/20080825/google-dollar-rally-to-drag-on-q3-results/ http://allthingsd.com/20080825/google-dollar-rally-to-drag-on-q3-results/#comments Mon, 25 Aug 2008 18:11:17 +0000 Eric Savitz http://voices.allthingsd.com/?p=3088 Google’s (GOOG) third-quarter results will feel the effects of a strengthening dollar, Collins Stewart analyst Sandeep Aggarwal observed in a research note this morning. Aggarwal points out that currency has lifted earnings in each of the last 10 quarters, but that the company will suffer a sequential FX loss in Q3, with the year-over-year benefit “materially lower” than in recent quarters.

Aggarwal says trend reversal in FX “will put $22 million” of “negative pressure on Google’s gross margin” on a sequential basis, and will provide only a $132 million boost on a year-over-year basis, versus $248 million in Q2 and $202 million in Q1.

Aggarwal, who maintains a Buy rating and $615 price target on the stock, says that the currency shift “is not a thesis changer, but a noteworthy trend reversal to watch for.”

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]]> http://allthingsd.com/20080825/google-dollar-rally-to-drag-on-q3-results/feed/ 1 http://allthingsd.com/20080709/goldman-cuts-intu-driv-to-sell-cautious-on-software/ http://allthingsd.com/20080709/goldman-cuts-intu-driv-to-sell-cautious-on-software/#comments Wed, 09 Jul 2008 14:49:42 +0000 Eric Savitz http://voices.allthingsd.com/?p=1900 Expressing caution on the software sector heading into second-quarter earnings report, Goldman Sachs software analysts Sarah Friar, Sasa Zorovic, Derek Bingham and Frederick Grieb this morning chopped estimates on a host of software companies. They also cut their ratings on both Intuit (INTU) and Digital River (DRIV) to Sell from Neutral.

“A difficult U.S. macro environment and its slow spillover internationally create problems for the group,” the Goldman analysts wrote in an extensive software industry research note this morning. “These are seen in longer sales cycles, price discounting, and the need for multiple signatures for deal closings, and hence sales slippages. All this is somewhat offset by currency benefits, ongoing strength in emerging markets and trough valuations.” They also note that short interest in the group is at a three-year high and could provide some support for the shares.

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