The comments follow a less than stellar fourth-quarter performance in which the gigantic e-commerce provider spent nearly as much money as it brought in the door — even during its busiest quarter of the year.

Profits for the quarter fell 58 percent, while annual earnings were cut nearly in half.

Some analysts were hoping that the end of the year would be a low point for margins and that Amazon would start growing in 2012 as it benefited from the steep investments made the prior year.

But that’s not part of the plan.

“We’re incredibly optimistic about the opportunity that we have, and that’s why we have invested the way we have and why we’re continuing to invest in the business,” said Amazon’s CFO Tom Szkutak in a conference call with analysts.

For clarity, Piper Jaffray analyst Charles Munster asked again: “So, your outlook in terms of investment philosophy hasn’t changed versus last quarter going forward?”

“No, no,” Szkutak said. “We are continuing to look as we always do. We learn every week, month and quarter about customer adoption. We are looking at a lot of positive things across the business in terms of adoption, specifically Kindle growth from a device standpoint and content that’s following that.”

Other categories seeing growth, he said, include clothing, consumables, consumer electronics and Amazon Web Services.

“There’s a lot of interesting opportunities that we continue to invest in. So we are pleased with the performance in Q4 and what it means going forward for us.”

Over the past year, Amazon has invested heavily in infrastructure, including 17 fulfillment centers around the globe. At the end of the year, it had 56,200 employees, up 67 percent year over year, with most of the hiring coming in operations and customer service.

It has also invested heavily in the digital content business, including the Kindle.

It’s widely assumed that Amazon is breaking even or taking a slight loss on the sale of each Kindle Fire. It’s also securing expensive partnerships with content companies across music, video and books, and giving some of that content away as part of the $80 Prime membership, which also includes free two-day shipping.

All of those are bets that Amazon is hoping will reap profits over the long term, as customers continue to consume after they purchase an e-reader or tablet or sign up for Prime.

So far, it’s too early to see how the investment is faring, especially when it comes to new categories.

“It’s very, very early,” Szkutak said, “but so far, we like what we see, so that’s why we are continuing down the path of adding more content and making Prime better. … Because we are investing a lot, we are making sure we understand it very well.”

A lot of details, like Kindle sales numbers, are still being kept under wraps, but he promised Amazon will someday share more about how it is doing.

Unfortunately, the market isn’t as patient. In after-hours trading, the stock was down almost 10 percent at one point. During the session, it ended up down, 8.7 percent, or nearly $17 , to close at $177.50 a share.

But Amazon isn’t Netflix, which has to convince investors and consumers that its business isn’t fundamentally broken. Jeff Bezos and company have a much easier story to sell: Profits are down because they’re spending money on expansion.

A lot of the money is going into Amazon’s old business, CFO Thomas Szkutak explained on yesterday’s conference call — the company is building out dozens of new distribution centers to help it ship all the physical stuff its customers still order. And a lot of the money is going into its new digital business — in particular, the new Kindle Fire.

Amazon is ultracautious when providing any details about its business, and Szkutak didn’t break from that tradition yesterday. But he did go out of his way to play up the company’s investments in its new tablets.

And while he didn’t spell it out, he made it quite clear that the company was happy to lose money on the tablets in the short term because it could sell more stuff to Fire owners in the long run.

Here’s a partial transcript from Seeking Alpha; it’s a bit garbled, but much more useful than my chicken-scratch notes from the call. Note the repeated reference to the “lifetime value” of the gadgets [my emphasis added]:

We’re investing in our Kindle and Digital business [and] you’re seeing that reflected in our Q4 guidance as well … if you take a look at our Kindle business, for example, we’ve launched 4 new products at the end of September, and we’re very, very excited about those products. They’re at great prices, and they are certainly premium products … And [when] we think about the economics of the Kindle business, we think about the totality. We think of the lifetime value of those devices. So we’re not just thinking about the economics of the device and the accessories. We think about the content. We are selling quite a bit of Special Offers devices which includes ads. We’re thinking about the advertisements and those Special Offers and those lifetime value[s].

Szkutak hit the same points a few minutes later. Remember that Amazon is disciplined at saying very little on these calls. So when Szkutak hits these talking points repeatedly, it’s not an accident:

We have learned a lot over the past couple of years … since launching Kindle. … what we’re seeing certainly is that once customers purchase a Kindle and are carrying around this really massive selection at their fingertips, they’re buying more content. We’ve talked a lot about that on previous calls. But again as we think about the lifetime value … we look at the total economics which include the device, the accessories, the content, as well as any ad-based revenue and Special Offers. So those are the things that we’re looking at, as we think about the lifetime value of the device. And we like what we see. And so certainly as you think about Q4 and you think about the guidance that we’re giving, certainly we’re going to have a — we expect to have a record quarter in terms of device sales. And because of the back-end loading of it, you should assume that the content would, obviously, trail that device sale. The ad revenue would trail those device sales as well as the Special Offers.. But we’re extremely excited about both our electronic ink and fire devices … and we think that those will be great for share owners over time.

As long as we’re parsing the call, it’s worth noting that Szkutak repeatedly points out the value of advertising on its tablets. I’d previously assumed that the company thought of ads — several of the Kindle base models now come with “special offers” as the default option — as a way to defray the Kindle’s costs, so it could get more of them in customers’ hands. But it seems Amazon has bigger ambitions.

Again, it’s important to stress that Amazon’s gadget model is the opposite of Apple’s: Tim Cook sells media so he can sell iPads and iPhones; Bezos sells Kindles so he can sell books and videos and music and even advertising.

Apple has already established that its model works. Now we get to see Amazon’s theory really put to the test.

Microsoft had a solid fourth quarter, which is why the conference call with Wall Street analysts should be relatively short and sweet.

Or sweet, at least.

Microsoft reported beat expectations on profits that rose 30 percent, as well as on revenue. Of particular note were its Office, Entertainment and Devices and Servers and Tools units. Even the revenue at its perpetually money-sucking Online Services division was up 17 percent.

(You can see Microsoft’s charts and other data here, if you really want more.)

Here’s a liveblog of the call:

2:31 pm PT: Well, Microsoft investor relations dude-in-chief Bill Koefoed sounds unusually jaunty in his greeting.

And why not? The results are good for Microsoft, even a little giddy, with a lot of impressive numbers and solid launches of several products, from Xbox Kinect to Office 365 to Bing, the very pricey but pretty search service.

Next up is CFO Peter Klein, who also sounds like this particular call is a relief.

He talks about the results a bit, most of which are up.

“In summary, we are pleased,” says Klein about the quarter and the year. He also notes that he is “excited.”

It’s party time in Redmond!

2:38 pm: Peppy Bill is back, going through the numbers. Solid!

Klein then moves onto the future and he remains “excited.”

Now, it is onto Q&A from the analysts.

This is where I zone out a little and start to wonder if a doughnut is a wise choice for an afternoon tasty treat.

That would make me “excited.”

Lots of congrats, which only makes me hungrier. One analyst asks why it was so much stronger than expected.

Klein: The economy has improved, businesses are expanding, peeps love them some cloud.

There is a question about how the troubled Yahoo search partnership is going. Klein promises some improvement by the end of the year.

Still, bummer!

But it is quickly back to happy, with a question about the strength of Xbox and its subscribers.

“It’s fantastic,” says Klein.

Like I said, sweeeeeeet.

The Wall Street Journal reported earlier tonight that Microsoft–in what would be its most aggressive acquisition in the digital space–was zeroing in on buying Skype for $8.5 billion all in with an assumption of the Luxembourg-based company’s debt.

Sources told BoomTown tonight that the deal for the online telephony and video communications giant is actually done and will be announced early tomorrow morning.

The purchase–which has been spearheaded in closely held negotiations by Microsoft CEO Steve Ballmer, with an assist from Business Division CFO Amy Hood and top dealmaker Charles Songhurst–is a bold move for the software giant and its biggest acquisition in more than three decades.

The big price will give Microsoft–which has struggled in its online efforts and has lost billions of dollars for its work–a big brand name on the Web.

With Skype, which has been aggressively expanding, Microsoft will continue to lose money in its Internet efforts. Skype lost $7 million on revenue of $860 million. Operating profits, which Skype preferred to highlight, were $264 million.

And–let us not forget–Skype’s debt is $686 million. Silver lining: That’s slightly less than Microsoft’s Online Services division losses in its most recent quarter!

But, sources said, the concept is bigger than just money, including getting access to Skype’s 663 million registered users.

Skype, which had been headed bumpily toward an IPO until now, will apparently be integrated into Microsoft’s Windows Live and other online communications efforts in both the consumer and enterprise arenas, sources said.

Think Kinect connecting.

Skype has had a big-company owner before–eBay Inc. paid $2.6 billion in cash and stock for it in 2005, as a way for the auction site’s buyers and sellers to communicate.

A 70 percent stake in Skype was sold in 2009 to investors such as Silver Lake Partners, Andreessen Horowitz, and the Canada Pension Plan Investment Board. It then valued Skype at $2.75 billion.

So, obviously, the deal is a big win for them. In addition, at the time they made their investments, Skype was a huge legal mess with lawsuits flying.

Skype has since gotten cleaned up enough to attract Microsoft.

Other suitors have looked at Skype, including Google, although acquisition interest by Facebook was very much overblown, said several sources.

Interestingly, Microsoft’s new smartphone partner Nokia also held meetings with Skype’s CEO Tony Bates, a former Cisco exec who arrived at the company last fall.

Interest in Skype by Microsoft was first reported by GigaOm’s Om Malik on Sunday.

Tune in at 5 am PT for the official press release, apparently, and lots and lots and lots of analysis of whether Microsoft paid too much for Skype.

Today, after Demand Media beat Wall Street expectations, its execs got on the horn with investors to explain how it plans to beat the Panda.

That would be the beastly name for Google’s rejiggering of its search algorithm, in order to rid search results of poor quality content.

Along with many other sites, Demand has gotten smacked by its raging paw.

Still, the Santa Monica, Calif.-based company reported revenue of $79.5 million and six cents a share in adjusted net income.

Wall Street was expecting the company to report about $69.6 million in revenue for the three months, with four cents a share in adjusted profits.

On a GAAP basis, net loss per share was 13 cents compared to 94 cents a year ago.

Here’s the liveblog of the conference call:

2 pm PT: Demand’s investor relations dude came on and I immediately tuned out until CEO Richard Rosenblatt got on the line to talk about the results.

He was as perky as ever, launching right into the meat of the situation–how Demand was going to pretty up its offerings, such as a redesign of its flagship eHow site and its new editorial arrangement with another perky person, food lady Rachael Ray and the also perky fashionista/talk show lady Tyra Banks.

Gone will be user-generated content that Demand used to let people post at will on its eHow site that was, well, less than good.

As in, bad.

Instead, it’s “curation,” “editorial innovation” and feedback cycles.

We old-timers like to call that journalism and copyediting, complete with mean old editors who spiked said copy when it was crappy.

“Let me be clear,” said Rosenblatt, the Google changes did negatively impact Demand’s traffic. But Rosenblatt said the company dug into its content and has been improving it since.

2:17 pm: Now it was CFO Charles Hillard reading the results themselves. I am sorry, Mr. Finance Guy, but I can read it myself, so this is always the time in earnings calls when I check out and spend my time improving my content.

So when I heard words such as “stock-based comp,” I moved on to fixing all the typos that a very nice reader alerted me to, since I was writing too quickly.

Then, I briefly considered writing a high-quality post for eHow on how to write earnings and fix typos at the same time. I am that good.

2:30 pm: The CFO dude finished up and the Q&A with analysts started.

All Panda questions, natch!

Rosenblatt seemed calm, cool and collected.

“We think on this one, they did a very good job,” he said of Google’s search-fixing efforts, trying to soothe the savage beast. “We all continue to evolve.”

Which translated to: Google says jump and we say: “How high?”

Which is then followed by: “Please sir, can I have some more (traffic)?”

More Google algo change questions.

I suspect there is a new tactic afoot by Demand: Bore us into submission about the traffic devastation from Larry Page’s minions with endless questions about algo.

Finally, a question about mobile and international expansion. Apparently, Demand content is going to be translated into five different languages.

Yay! I am readying my version of “How to Boil Water” in French! (“Comment Faire Bouillir L’eau”!)

Mobile is going to be big too for Demand, which it is for everyone.

Then it was onto a question about improving content, including paying its writers more moolah, which would then eat into the Demand cheaper content business model.

I liked that question! I suddenly decided I was going to shift to a lugubrious post on the history of the Maginot Line in 132 parts!

Oops, Rosenblatt said the data has to show that the peeps want those longer pieces.

Back to the boiling water opus!

It’s on to some video questions and then back to search, as in diversifying away from relying on search to get traffic and premium prices for its advertising.

As in, how much are you going to cozy up to Facebook CEO Mark Zuckerberg?

“It’s less about where traffic comes from and more about where they land,” said Rosenblatt, except you just know he sent a lovely floral bouquet plus a hefty selection of citrus to Zuckerberg’s new house in Silicon Valley right after Panda roared.

Rosenblatt deflected a lot of questions in this arena. “We still think that search is a fantastic way” to gain traffic, he said, making sure Google’s Page did not chomp off his hand as he courted his social networking nemesis at Facebook.

But as the old Kikuyu proverb goes: “When elephants fight, it is the grass that suffers.”

More likely, as Mary Chapin Carpenter sings: “Sometimes you’re the windshield. Sometimes you’re the bug.”

We’ll see which is which for Demand in the quarters ahead.

Until then, here’s Carpenter performing her song, “The Bug”:

Demand Media handily beat Wall Street expectations in its first quarter results today, released after the market closed.

The company reported revenue of $79.5 million and six cents a share in adjusted net income.

Investors were expecting the company to report about $69.6 million in revenue for the three months, with four cents a share in adjusted profits.

On a GAAP basis, the net loss per share was 13 cents compared to 94 cents a year ago.

The decent results could boost Demand’s stock, which has been hit hard since Google launched “Panda,” an overhaul of its search algorithm to improve results and remove poor quality content.

In a conference call at 2 pm PT today, which BoomTown will be liveblogging, most will be paying more mind to what the online content company’s top execs–especially CEO Richard Rosenblatt–have to say about the impact of the updates from Google to Demand’s various Web offerings.

As a first strike, some of Demand’s execs briefed the media earlier today on efforts to improve the quality of its content–you can read the official press releases here on that and also here.

In them, Demand said it will remove some online posts that were substandard and created under a now-suspended writers’ compensation system. It said it is also improving reader feedback tools and adding more substantive stories to its sites.

Those are all good ideas, since Google’s tweaks have been chewing away at a range of Web sites–such as those owned by Demand–which rely heavily on search engine optimization to bring in huge traffic.

One big hit for Demand, due to Panda, has been to its flagship eHow site.

All the mishegas has hurt the Santa Monica, Calif., company’s stock. It’s down just over 30 percent since Demand’s IPO in late January, as bearish investors fret over the implications of Panda.

Still, in its report, Demand said its content and media revenue was up 72 percent to $51.9 million, compared to $30.2 million last year.

The Seattle-based company said revenues totaled $9.86 billion, compared with $7.13 billion in the year-ago period, and that net income decreased 33 percent to $201 million or 44 cents a share.

In a statement, Jeff Bezos, Amazon’s founder and CEO, said: “We love inventing on behalf of customers and have never been more excited about the long-term opportunities.”

But you have to wonder how much investors love it.

The company’s stock dropped $3.12, or 1.7 percent, in regular hours, and then slid another 90 cents in after-hours trading.

Besides investments, analysts questioned what impact the Japanese earthquake had on Amazon’s results, since the region is particularly strong for the company. Here’s updates from the call on that subject, as well as news from Amazon that it will start selling its ad-subsidized Kindle a week early.

In some regards the quarter demonstrates a return to the company’s frothy days when the motto was get big fast, and then later, that morphed into get bigger faster.

To be sure, the company is dipping its toes into a variety of pools, ranging from cloud computing to traditional e-commerce to digital commerce. It’s building hardware, such as the Kindle e-reader, announcing a new version recently that’s supported by advertising. It’s also just beginning to reveal where it’s mobile strategy is going with a promotion that crosses both its Android Appstore and its handset business.

To be sure, one of those growing pains was felt last week when when its cloud services crashed, leading to outages for nearly a week. The company did not comment on the crash in its earnings release, but it will likely have to answer analyst questions during this afternoon’s call.

Still, Amazon was able to meet its own sale forecasts, which predicted net sales of between $9.1 billion and $9.9 billion.

Sales also exceeded analyst expectations, who were hoping for revenues of $9.54 billion, representing a 34 percent increase from the same period last year, according to consensus forecasts from FactSet Research. However, Amazon fell way short of analyst’s earnings estimates of 61 cents a share. Amazon reported 44 cents a share for the quarter.

In the second quarter, Amazon is predicting software net sales ranging between $8.85 billion and $9.65 billion, representing year-over-year growth of 35 percent and 47 percent. Operating income is expected to be between $95 million and $245 million, declining by 9 percent to 65 percent.

The company reported sales of $12.9 billion, up 25 percent from the same period a year ago, and per share earnings of 59 cents, up 37 percent from last year, pummeling the consensus Wall Street view that called for sales of $11.6 billion and earnings of 46 cents per share. Gross margin–a closely-watched indicator of profitability–was down slightly versus the year-ago period at 62 percent. The company generated $213 million in cash from equity investments in other companies.

The results were led by sales in the Data Center group, which specializes in selling chips for use in servers used in data centers operated by large corporations and cloud computing service providers, which grew 32 percent over the year-ago quarter. Sales in the PC group grew 17 percent, despite reports from market research firms Gartner and IDC last week suggesting that sales of personal computers are slowing in the face of stiff competition from tablets like Apple’s iPad.

Equally strong was Intel’s guidance for the second quarter. The company said in a statement it expects revenue of $12.8 billion plus or minus $500 million, and for gross margins of 61 percent plus or minus two points. That exceeded the current analysts’ consensus by nearly $1 billion.

Intel shares surged in after-hours trading by as much as 7 percent at one point and were $20.68, up more than 4 percent by 1:17 PM Pacific Time.

Per share earnings were 54 cents, beating the consensus of 50 cents. Net income was $2.1 billion.

Oracle also said it would boost its quarterly cash dividend to 6 cents per share, amounting to a 20 percent increase over the previous dividend of 5 cents.

In a statement, Oracle CEO Larry Ellison touted the strength of the combined hardware and software businesses. “In Q3 we signed several large hardware and software deals with some of the biggest names in cloud computing,” said Ellison. “For example, Salesforce.com’s new multi-year contract enables them to continue building virtually all of their cloud services on top of the Oracle database and Oracle middleware. Oracle is the technology that powers the cloud.”

Operating margin was 44 percent on a non-GAAP basis, and the margin on hardware increased to 55 percent. President Safra Catz said in a company statement that Oracle is now “completely confident” the company will hit its previously stated goal of yielding a $1.5 billion fiscal year 2011 profit for the business it took over when it acquired Sun Microsystems.

Oracle shares rose by 7 cents to $32.25 in after hours trading.

Scripps says revenue at the site and its related spinoffs was up 38 percent, to $69 million, in the last three months of last year, while profits were up 20 percent to $21 million.

Those numbers are evidence that Shopzilla is both growing in Europe and doing much better in the U.S. following an intensive overhaul. The company says redirects from the site are up 39 percent; it’s worth noting that this is happening while Google tries to find ways to keep comparison shopping sites from clogging up search results.

Scripps’ primary business, however, is running cable networks like the Travel Channel, HGTV and the Food Network. And that business is doing fine without an overhaul: Revenue was up 32 percent, to $500 million, and profits were up 48 percent, to $248 million.

Companies are signaling they’re more comfortable spending money on technology now that sales and profits are expanding. “What drives tech spending are profits,” said Bill Whyman, head of tech strategy research at equity research broker dealer ISI Group Inc. Corporate profits have been surging the last few quarters and spending usually lags profits by three quarters, he said.

World-wide information technology spending is forecast to increase 5.1% to $3.6 trillion this year, according to market research firm Gartner Inc.

Read the rest of this post on the original site »

An in-app payment option was supposed to be released last quarter, but Google delayed the launch in order to get more feedback from developers, who had been very busy at the end of the year with Christmas app development and sales, according to Chu.

(Meanwhile, start-ups like Zong are already offering in-app payments for Android, but Chu said he’d prefer developers to wait until Google can get its own version out to provide a consistent user experience.)

In-app payments are important because they enable developers to sell virtual goods and premium features, both major potential sources of mobile revenue in addition to paid apps and advertising.

Android has a ways to go to convince developers that its app platform is on par with Apple’s iPhone, especially in terms of monetization. “We are not happy with the payout purchases in Android Market,” Chu said.

Google has been slow to form partnerships with carriers, and so far has done so only with T-Mobile USA and AT&T, but Chu said this is currently a major area of investment.

Asked whether carriers get too large a cut, Chu said that carriers deserve a share of the profits since they significantly subsidize the cost of phones.

Chu acknowledged problems with Android Market’s initial approach, mentioning Google has made changes, such as taking a more active approach to removing bad apps, and reducing the refund window (the length of time customers have to return paid apps) from 24 hours to 15 minutes.

Chu said his team is actively working on products to improve Android Market merchandising and app discovery with better search and lists, as well as an improved ranking system.

Google is open to feedback about changing the refund window, said Chu, but it will draw a hard line about refunds for virtual goods. Not gonna happen, he said.

Intel said in its statement that PC Client Group revenue was flat. Other groups were stronger: Data Center Group revenue was up 35 percent, and Intel’s architecture group saw sales surge by 27 percent. Intel Atom microprocessor group, its low-power chip aimed at tablets and smartphones, saw revenue grow 8 percent. This despite word from Microsoft last week at the Consumer Electronics Show that it will develop a version of Windows for ARM-based chips from Texas Instruments, Qualcomm and Nvidia aimed at tablets and smartphones. Microsoft’s move calls into question Intel’s hopes to land design wins for the Atom low-power chip that it hopes to sell to manufacturers of smartphones and tablets, but which has yet to show any significant results.

This report of flat revenues for PCs comes a day after Gartner and IDC both said they saw weaker-than-expected sales of PCs in the fourth quarter of 2010.

For its 2011 first-quarter outlook, Intel said it expects revenue of $11.5 billion, plus or minus $400 million, and a gross margin of 64 percent, plus or minus a couple of points. For the full year, it expects gross margins to be 65 percent, plus or minus a few points. More after I go through the numbers and attend the conference call, which starts in about an hour.

Sales were $8.6 billion, helped mostly by new software license sales that grew 21 percent to $2 billion, while updates and product support revenue grew 12 percent to $3.7 billion. The consensus estimate was $8.34 billion. Sales grew 47 percent from the same period a year ago.

Non-GAAP per-share earnings were 51 cents, beating the 46-cent forecast estimate of analysts surveyed by Thomson Financial. Earnings after one-time items were 37 cents, up from 29 cents a year ago.

Gross margins on Sun-branded hardware increased to 53 percent.

Shares are up almost 4 percent in after-hours trading.

There’s a quote from CEO Larry Ellison, reminding us how fast his new products are, and digging once again at the competition:

“Sun’s new SPARC Supercluster computer shattered the world record for database transaction processing performance by running 3 times faster than IBM’s fastest computer, and a stunning 7.5 times faster than HP’s best ever database performance,” said Oracle CEO, Larry Ellison. “Our new generation of Exadata, Exalogic and SPARC Supercluster computers deliver much better performance and much lower cost than the fastest machines from IBM and HP.”

Here’s another quote, from Oracle co-President (and former HP CEO) Mark Hurd, about the Exadata product line:

“Since joining Oracle I’ve met with and visited many customers that have expressed a high level of enthusiasm around our strategy of engineering hardware and software that works together,” said Oracle President, Mark Hurd. “That enthusiasm translates into an Exadata pipeline that has now grown to nearly $2 billion. That number is a good leading indicator that customers are planning to increase their investment in Oracle technology.”

Yes I would say there’s enthusiasm. It was precisely because of the Exadata line that Macquarie Research upgraded Oracle today.

More from the conference call, which starts at 5 pm ET.

4:53 pm: Seven minutes to go before the Oracle earnings conference call starts. Right now it’s all mellow classical guitar.

Call is running a little late.

5:10 pm: And we’re underway with the safe-harbor statement.

Ellison, Hurd and president Safra Catz are on the call.

Americas grew 32 percent in U.S. dollars.

5:15 pm: Balance sheet: $24.8 billion in cash and short-term investments.

Generated $3.7 billion in free cash flow.

5:15 pm: Safra Catz is now speaking. We exceeded the high point of license guidance. Even excluding a payment for legal fees, we beat guidance by 4 cents.

5:16 pm: All geographies reported double-digit growth.

5:16 pm: “We continue to take share from SAP.”

5:17 pm: With Sun, included operating margins were 44 percent, which is better than SAP. [Another dig.]

5:18 pm: Hardware guidance: $1.1 to $1.2 billion in revenues.

Non-GAAP EPS expected to be 48 to 50 cents, and 34 to 36 cents on a GAAP basis.

Here’s Larry:

5:19 pm: Our goal is to be No. 1 in high-end market for servers. Right now our numbers are behind HP and IBM.

5:20 pm: IBM’s and HP’s servers are slow, and software is slow and expensive and have no software value-add. [Another dig at the competitors.]

5:22 pm: Exadata pipeline continus to grow. We expect our new generation of Sun machines will enable us to win significant share, and position us in the No. 2 position behind IBM very soon. And then we’ll fight it out for No. 1.

5:23 pm: Now Mark Hurd is speaking.

5:23 pm: I want to focus on our opportunities to grow significantly.

5:24 pm: Deal volume was spread across companies of all sizes and strength in the public sector as well.

5:24 pm: All of our customers and competitors are reacting to us.

5:25 pm: 150,000 Middleware customers. We ended the quarter with a record hardware backlog.

5:26 pm: Now going to Q&A:

A question from UBS. Are you starting to see a halo impact on adoption of the Oracle suite?

Larry: Close rates are improving. You’ll see great improvement in Exadata sales from Q2 to Q3. Because it’s new, people were running a lot of benchmarks and trying it out first. We’ll sell a lot more Exadata in Q3 than in Q2.

As for the halo effect, when you buy these servers you buy them to run specific software. Engineer them at the same time and make sure they run well together. We have a huge advantage over IBM and HP. The notion of systems, hardware and software that run well together will dominate the high end of the business.

Q: You clearly have a lot of irons in the fire with Fusion apps coming up and Exadata. Focus on Exalogic. Can you share early feedback from customers and compare that to Exadata ramp.

Mark: Exadata experience benefits Exalogic. We’ve matured the use case, we think we know where the targets are. The Exadata experience is a big deal for us.

5:31 pm: A question about Fusion Middleware.

Larry: We’ve been in the middleware business for a long time. With release 11 everything has been rewritten. It’s a much better user experience, you can patch our entire suite with a single file. We think the fact that we have an integrated suite gives us a huge advantage over IBM.

5:33 pm: A question about Europe. It was better than expected. Apps business was really strong. Look at competitors. You’ve been gaining share against SAP. We are seeing a pickup in general environment.

Hurd: I’m not an economist, but we’re doing well in Europe. It was broad-based. It was not singular to a deal or country. It was broad-based to countries where we have been gaining share. It’s been one quarter after another, a pretty steady beat.

Larry: We had a wonderful set of industry specific applications, in telecommunications and banking and retail, and that’s unique vis-a-vis SAP. that has helped us a lot to establish us in a lot of industries. Also Fusion is right around the corner.

5:35 pm: Q: How frequently is an Exadata deployment resulting in the displacement of a competitor’s product?

Hurd: About 70 to 75 percent of the time. About 20 to 25 percent of the time it’s a consolidation.

We’ve sold Exadata now in 50 countries, and 30 to 35 percent of our customers have made a second purchase. You’re starting to see repeat purchases. We’ve learned a lot about this and so as we launch Exalogic we can accelerate our learnings.

5:36 pm: Q: Margin was also great. What can we expect going forward and what were one-time items?

Catz: In general, it’s the business. The only nonrepeatable thing is the $120 million legal settlement, which we will not repeat. Hardware margins and operating margins, this is something we’ve done for many years.

5:38 pm: Q: What is visibility for database licenses?

Larry: A couple quarters ago, someone noticed database licenses were growing nicely. We think Exadata is going to be a nice turbocharge to our database business. Across the board our database business is going to get strong with Exadata.

I just looked at after-hours trading in Oracle shares and they’re up more than 4.5 percent.

Hurd: “The secret to Exadata is bringing the smarts to the data, versus bringing the data to the smarts.”

5:42 pm: Q: What continues to drive the database business? Is it just core database, add-ons?

Larry: We think our technology is getting faster and more reliable at a faster rate than that of our competitors.

5:43 pm Larry: As far as applications, we think there are lots of reasons we continue to gain share every quarter over the last few years over SAP.

It’s the industry-specific applications. We have telecom companies that are running only Oracle software. We have some banks that are making the same kind of commitments up and down the stack. SAP just doesn’t have that.

5:44 pm: Larry: We’ve got this extremely modern Java-based suite called Fusion that is going to strengthen our competitive stance against Salesforce.com and against Workday.

5:46 pm: That seems to be it. The call is concluded.

Following the release, the company’s stock began a free fall, dropping 15.25 percent to $35.34 a share over concerns that the retailer is losing market share to Amazon, Target, Wal-Mart and others.

What’s worse is that the retailer appears to be one of a few that is not seeing this year’s goodwill. ComScore is reporting big online sales gains this year compared to last year, and the Commerce Department said today that retail sales rose for a fifth straight month in November due to increasing consumer confidence.

Meanwhile, Best Buy reported a 4.4 percent drop in quarterly profits, and was forced to lower its per-share profit forecast for the year to the range of $3.20 to $3.40, which is down from its previous guidance of $3.55 to $3.70 a share.

In the three months ended Nov. 27, Best Buy reported $11.9 billion in revenues, falling from $12.02 billion in the same period a year ago. Net income fell to $217 million from $227 million in the same period last year.

In the quarter, Best Buy said sales of TVs declined in the U.S., but the loss was partially offset by an increase in smartphones and tablet computers. Best Buy faces stiff competition from retailers such as Wal-Mart, Amazon, Target and GameStop, which were more aggressive on pricing. The Wall Street Journal reports that the company surrendered 110 basis points of market share in the most recent quarter.

AMD also said it expects Q4 revenue to be sequentially flat with the third quarter. That would imply $1.62 billion; the Street has been forecasting $1.67 billion.

On a GAAP basis, the company lost $118 million, or 17 cents a share.

“AMD’s third quarter performance was highlighted by solid gross margin and a continued focus on profitability, despite weaker than expected consumer demand,” CEO Dirk Meyer said in a statement. Gross margin in the quarter was 46 percent.

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Floated with an initial offering price of $17, shares in the company opened at $19 and closed at $23.89–up $6.89, or 40.5 percent. Not a surprise, really, since Tesla (TSLA) raised the size of the IPO to 13.3 million shares from 11.1 million shares yesterday, presumably because of strong interest in the offering from investors.

That Tesla hasn’t earned a dime since it was founded in 2003 and doesn’t expect to post a quarterly profit until at least 2012 doesn’t seem to have fazed investors, who are evidently quite impressed with the company’s $109,000 all-electric Roadster and the fact that it has managed to sell 1,063 of the vehicles in less than two years.

“A lot of people were puzzled about why we were going public without profits,” CEO Elon Musk said today. “The reason we are not profitable today is because we are in the midst of expanding with the Model S.”

The bet here, then, seems to be the promise of the S, the $50,000 electric sedan the company plans to bring to market in 2013. And that appears to be working out quite well for Tesla.

But Barris and other investors who accepted a $1.35 billion valuation on the group-buying Web site after a recent round don’t see a return to Internet bubble levels of price inflation. Instead, they think Groupon is one of a new breed of Internet companies worth their weight in gold because of how quickly they can grow.

These days, “you can build a big company, a very, very big [Internet] company,” Barris said. “Business is back to measuring revenue and profits.”

Groupon attracted $135 million in funding, mostly from Russian investment firm Digital Sky Technologies, which has done similar deals with Facebook Inc. and social gaming company Zynga Inc. in the past year. The balance came from new investor Battery Ventures. Early investors NEA and Accel Partners did not reup, but they didn’t take any capital off the table, either.

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Dell (DELL) is acquiring Kace Networks, a systems-management appliances venture with clients in government, education and health care. Terms of the deal were not disclosed.

For Dell, which is pushing harder than ever to expand tech services offerings, the deal seems a savvy one. Certainly, it dovetails nicely with the company’s acquisition of Perot and will aid its effort to peddle services to small- and mid-sized businesses–something the company clearly needs to do as profits from its core personal computer business dwindle.

• News Corp. CEO Rupert Murdoch tried to lower expectations that his Fox broadcast network would hire Conan O’Brien.
• Murdoch hinted that his book publishing unit is in line to get a new deal on e-books from Amazon, just as Macmillan has demanded (as will other publishers).

On the second point, here’s my on-the-fly transcription and paraphrasing of Murdoch’s comments about Amazon (AMZN), Apple (AAPL) and e-book pricing. It’s one of the most candid descriptions you’ll hear from a top executive about Big Media’s reluctance to embrace digital distribution at the expense of its existing system and revenue:

“We don’t like the Amazon model of $9.99….We think it really devalues books and hurts all the retailers of hardcover books. We’re not against electronic books; on the contrary, we like them very much” because they cost us less to distribute, “but we want some room to maneuver.” The Apple deal…“does allow some flexibility and higher prices” though e-books will still be lower than print versions. And now Amazon is willing to sit down with us again and renegotiate.

UPDATE: Here’s a more complete transcript from Seeking Alpha:

We don’t like the Amazon model of selling everything at $9.99. They don’t pay us that. They pay us the full wholesale price of $14 or whatever we charge. We think it really devalues books and it hurts all the retailers of the hard cover books. We are not against [inaudible] books. On the contrary we like them very much indeed. It is low cost to us and so on. But we want some room to maneuver in it. Amazon, sorry Apple in its agreement with us which has not been disclosed in detail does allow for a variety of slightly higher prices.

There will be prices very much less than the printed copies of books but still will not be fixed in a way that Amazon has been doing it. It appears that Amazon is now ready to sit down with us again and renegotiate pricing.

Again, it’s impossible to stress how scarring the music labels’ experience has been for Big Media. And they’re determined not to repeat the experience. Their takeaway, though, seems to be that they can stave off digital distribution by keeping prices high and inventory relatively scarce. Hard to believe consumers are going to go for that.

Earlier

A first glimpse at News Corp.’s fourth-quarter earnings (which, due to the company’s weird fiscal calendar, is technically the company’s Q2 for 2010): Pretty good. And much better than a year ago (thankfully). After factoring out one-time charges, the company posted earnings of 25 cents on revenue of $8.7 billion.

The Street was looking for earnings of 20 cents on revenue of $8.23 billion, and analysts were also hoping the company would boost its earnings forecast, due in part to a bump from the ginormous success of “Avatar.” No word on guidance in the earnings release, though.

I’ll pick through the release for other worthwhile nuggets for the next few minutes. And then the real show begins at 4:30 Eastern, when the company’s earnings call–easily the most entertaining one in its peer group due to the censor-free presence of CEO Rupert Murdoch–begins. We’ll be looking for commentary on his battle/negotiation with Google (GOOG), upcoming content deals with Apple and the iPad, his thoughts on paid content in general, a dash of political commentary or two, and an update on the turnaround effort at MySpace.

From the release: A pretty nice quarter at most of the conglomerate’s divisions, including the previously battered broadcast TV and newspaper groups. News Corp. says print revenue at The Wall Street Journal was up five percent and ads on the Journal’s digital network were up 17 percent.

MySpace and the company’s other digital properties, shuffled into the “other” category, don’t get much of a mention, but don’t seem to have done much, not surprisingly.

But News Corp does mention that digital media earnings were down $32 million compared with a year ago, “principally due to lower search and advertising revenue.” And the company lost $29 million on “digital media dispositions”–i.e., the fire sale/giveaways of properties like Rotten Tomatoes and Photobucket.

Here’s the breakdown by segment (click table to enlarge):

Liveblog

CFO Dave DeVoe: “Extremely pleased” with the quarter.

Movies: Revenue up due to decent DVD sales (no MGM problem here). Also high costs due to “Avatar,” but big profits from the movie will be coming in during the next couple quarters.

Broadcast TV: Local ads are improving; the telecom, fast food, finance categories are all improving.

Cable: Revenue is up 18 percent. Affiliate revenue is up 21 percent (more money for Fox News subs), and there was a “single-digit” boost in ad dollars.

Newspapers: Journal dollars are up, operating costs down. Ad revenue got better as the quarter progressed.

Books: Revenue up, expenses down.

“Other”/MySpace: Digital media revenue down, but cost-cutting helped trim losses.

News Corp. is boosting its dividend by 25 percent.

Guidance: The company’s operating income growth rate is expected to grow from single digits to the high teens. Better than anticipated: Film group, TV and cable. But revenue goals for digital media, including MySpace, will take longer than anticipated.

Murdoch sings the praises of content. [I will not argue with him, for now]. “Avatar” is awesome, he says, a “harbinger of fundamental change in the industry.” Also really good: “Alvin and the Chipmunks.” Fun to hear Rupe say “Alvin and the Chipmunks.”

WSJ is the No.1 paper in U.S. in terms of circulation, influence, quality. WSJ.com is a “digital model for newspapers around the world.”

Fox News Channel’s audience is both “loyal and lucrative.” Roger Ailes is doing an “admirable job” [translation: Bite me, Michael Wolff--the author of a recent Murdoch biography].

Last year, Murdoch says, News Corp.’s pay-to-play ideas sounded nutty, but now “the content clan has gathered around our ideas.” Consumers must pay and will pay “to be entertained and informed.” All those awesome new gadgets being made in China and sold at the Consumer Electronics Show need content or they’re worthless. Content, content, content. Get it? Content, content, content.

Murdoch says he’ll be wringing more dollars from cable operators. And “when it comes to online news, we’ll be changing that model too,” adding that News Corp. is in “substantive conversations with device makers on developing subscription models” to deliver content. And don’t forget about 3-D!

Not performing well but “long-term growth drivers”: Sky Italia satellite service. Also Sky Deutschland. And MySpace is “not yet where we want it.” In the last quarter, however, MySpace “started to see signs of traffic stabilization.”

Shout-outs for Chase Carey and other managers (but not by name).

Q&A

Question: How big a deal is retransmission consent in coming years? $40 million a month? $100 million a month?

Chase Carey: No numbers, but it’s going to be a “transforming event.” We have two of top 10 distributors done, more coming. It’s a three- or four-year process to knock these deals out.

Q: Does this fix the broadcast model?

Carey: “Yes, I guess you could say simplistically, it fixes it.”

Q: What’s the timing on an “Avatar” DVD, and what about a sequel? Also, how do TV ads look this year?

Murdoch: For “Avatar,” we think about 60 percent of profits will be in the next six months. Which means the DVD will be coming “as soon as possible,” but the movie will stay in cinemas for a while because we’re doing huge dollars in theaters still. Sequel? “Very early talks about it. Jim has ideas for one. We haven’t come to any agreement with him….Being Jim Cameron, I wouldn’t hold your breath for an early one.” Asked about the economics of a future release (“Will you keep the same revenue split?”), Rupe sort of rumbles and growls and sort of doesn’t have much to say. “Ask anybody; it is very easy to drop a $100 million in a hurry on a film, and we’d like to lay off some of the risk.”

Carey: TV trends for this year are “positive.”

Murdoch: TV stations will be up 18 or 19 percent, but last year was terrible. We’re still down compared with two years ago. Hard to see more than a quarter in advance. In newspapers, it’s hard to see more than a few weeks.

[Missed a question on Sky Italia here.]

Q: What are growth prospects for cable networks? They’ve been driven a lot recently by new subscriber fees. How much longer can you get those boosts?

Murdoch: Overall, “we think we have great potential for growth. Quite a long way to go yet.” Look at how NBCU’s USA is growing.

Carey: In the U.S., we’re moving to “quality over quantity”–we can wring more out of foreign exchange, etc. Fox News is only getting more powerful; it has “great upside.”

Q: Regarding newspapers, what growth came from organic increase versus currency fluctuations?

The majority is from foreign exchange.

Q: Does your guidance assume that the “Avatar” DVD is coming in the next two quarters?

Murdoch: “Yes, but it won’t be 3-D” [which I don't think the analyst was asking about].

Q: Back to retransmission consent: You’ve been getting more and more money from cable guys. Why can’t you get $4 or $5 per subscription for Fox broadcast subs?

Murdoch: “We’re modest people.”

Carey: Hyuk, hyuk. Real answer: It takes time. “We try to approach this constructively. We’ve built businesses with [cable guys], we’ve built valuable cable channels” [translation: patience!]. We want to extract more without killing the cable guys.

Murdoch: That said, we’re asking for the same thing [for broadcast channels] that the cable networks are getting, which “certainly won’t kill the cable companies.”

Q: Please talk about value of film libraries (i.e., MGM). They’re generating big operating profits for cable now. How long will this last?

Murdoch: Regarding the MGM auction, “you can count us out of that one altogether” because others will pay more than we’re willing. And we’re not pursuing the Miramax catalog at all.

Carey: A film library by itself, without new stuff coming through, is a “depreciating asset.”

Q: On guidance: You say the ad market getting better, etc., but it sounds like you’re saying Ebidta growth is slowing.

Murdoch: “We honestly do not have any visibility about the last quarter.”

Q: On books/e-books/Apple, what’s going on with that?

Murdoch: We don’t like the Amazon model of $9.99….We think it really devalues books and hurts all the retailers of hardcover books. We’re not against electronic books; on the contrary, we like them very much, lower costs to us, but we want some room to maneuver. The Apple deal does allow “some flexibility and higher prices” though e-books will still be lower than print. And now Amazon is willing to sit down with us again.

Press Q&A

Q: What’s up with plans to charge for newspapers on the Web?

Murdoch: “Not ready to announce yet [long pause]. We won’t be ready yet to make an announcement.” A “lot of talks with a lot of people.” There will be more to say within the next two months, Murdoch adds.

Q: Are you still going to fall $100 million short on the Google deal?

Murdoch: Yes. People using social networks don’t use search a great deal. Facebook has seen this, too. It’s “really too early to make confident predictions…but from going down, we’re beginning to go up.”

Q: Can we get some details about Time Warner Cable (TWC) deal?

Nope.

What about Conan O’Brien on late night?

Murdoch: If the programming people can show us we can do it and make a profit on it, we’ll do it in a flash. I’m sure there have been conversations with Conan, but “if you mean real negotiations, no.”

[Missed two questions here.]

Q: Another late-night question: If you do go into negotiations with Conan, how do you placate your affiliates?

Murdoch: It’s a different deal than NBC. They screwed up 10 pm, which reduced the lead-in to local news. Our affiliates run syndicated programming at 11:30, though, so it will take time to adjust there.

Call ended. This one seemed short to me.

More or less redundant disclosure: News Corp. (NWS) owns this Web site.

According to ABI Research, the iPhone’s share of the worldwide smartphone market in Q4 2009 slipped to 16.6 percent from 18.1 percent in the previous quarter.

Now, while it’s certainly ironic to lose market share in a record quarter, it’s important to keep a few things in mind.

First, counting units sold is just one measure of a device’s success at market. Another measure worth considering is profits relative to revenue. And according to some analysis we’ve discussed here before, Apple (AAPL) claims an inordinate share of the handset industry’s profits.

Second, iPhone sales typically spike in the third quarter–the first full quarter after the latest iPhone launch (in this case, the 3G S), and then taper off slightly after that. They did so after the 3G debuted, and they’ll almost certainly do so again when the company launches the device’s next iteration.

Finally, the fact that Apple has managed to claim 16.6 percent of a market in which it had no presence whatsoever three years ago and that it did so with a single device is astonishing.

So, does loss of market share signify the beginning of a decline in the iPhone’s popularity or the profits it generates for Apple? Not likely.