Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Intel, IBM Get Tech’s Q3 Earnings Season Under Way

Both the chipmaker Intel and the computing and tech services giant IBM will report quarterly results after the close of markets in New York today. And in different ways, the pressure is on them both.

In the case of Intel, we already know much of the bad news that’s coming. Intel laid out the particulars on Sept. 7 when it warned about a sizable sales miss amid declining demand for its chips that go into nearly all of the world’s PCs and and most of its servers.

That day, Intel said it expects sales of $13.2 billion, give or take $300 million, down from the prior range of $13.8 billion to $14.8 billion. It also lowered its expected gross margin, a key metric indicating profitability of its operations, by a point, to 62 percent.

The big reason is the drop in PC sales, coupled with the fact that server sales are under pressure around the world as companies and governments trim IT budgets. Also, Intel hasn’t significantly penetrated the hot market of the moment for chips: It sells chips to only a smattering of smartphone and tablet vendors.

Intel shares have been punished since that pre-announcement, and fell by about 14 percent in the five weeks since then. Today, it’s notable that the shares are rising by about 3 percent on chatter that Apple could be considering moving away from Samsung as the company that builds its chips, and bringing Intel on instead. It doesn’t sound especially credible to me.

Analysts are expecting earnings of 50 cents on sales of $13.2 billion, and the whisper number is a penny below that.

At IBM it’s a similar story. The global economy in the form of slowing demand in Europe combined with the strength of the U.S. dollar versus the Euro and other currencies is providing the biggest headwind. Even so, IBM has announced its share of large IT deals, including one worth about $1 billion during the quarter.

Analysts expect IBM to report earnings on a per-share basis of $3.62 on sales of $25.4 billion. Chris Whitmore, an analyst with Deutsche Bank Securities, said in a note to clients yesterday that he expects Big Blue to report about $13 billion in bookings. Gross margins, which he expects to come in at 48.2 percent, should get a boost, he says, from ongoing cost-cutting actions and the increasing emphasis on software, evening out the economic turbulence. “We expect previous cost reduction actions to support another quarter of strong margins in Services,” Whitmore wrote. “As a result, we remain comfortable with our EPS estimates despite choppy macro conditions.”

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There’s a lot of attention and PR around Marissa, but their product lineup just kind of blows.

— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google