The rash of financial reports released in the US this week continued to give mixed signals about the state of the IT industry. Upbeat performances by high-fliers like EMC and Nortel were countered by a shocker from Lucent, mediocre results from Computer Associates, 3Com and others, and a gloomy forecast from Dell.
Indeed, Dell's warning set a gloomy tone that seemed to take over the US markets after Michael Dell warned that the company's profit in the fourth quarter (which ends on February 2) will be about 33 per cent below forecasts. Dell attributed the poor performance to a "deterioration in global economic conditions and overall demand for computer systems and services". His reaction to the gloomy indicators has been to "aggressively manage" the company's cost structure. Dell will release its financial results on February 15.
Other results released during the week included:
Compaq lifted revenue 10 per cent from $US10.5 billion to $US11.5 billion but lost $US672 million after accounting for a $US1.8 billion charge primarily related to the write-down of CMGI shares acquired in exchange for AltaVista in 1999. International business was the company's saviour, with revenue outside the US growing 26 per cent.
Computer Associates lifted revenue in its third quarter, which ended on December 31, by five per cent from $US1.33 billion a year ago to $US1.40 billion. Net profit for the quarter climbed 28 per cent to $US247 million. The quarter was a period of transition for CA, which moved to a subscription-based accounting model where revenue is spread over the length of a contract as opposed to the previous licensing model where revenue was recorded in a lump at the start of a contract. CA's sales staff have been given incentives to shorten customer contract terms, even for mainframe software, and the company's CEO Sanjay Kumar said the new model allows the company to use flexible licensing to reach new customers. "Our peers are not going there," Kumar said.
Storage specialist EMC was on a roll in the fourth quarter of 2000 when its revenue jumped 40 per cent to $US2.62 billion and net profit climbed 49 per cent to $US563 million. "We closed an extraordinary year with a bang," boasted executive chairman Mike Ruettgers. "We said at the start of 2000 that information and access to it had become the currency of the global economy.
"Daily life today is a trail of digital transactions for each and every one of us, transcending socio-economic, industry or geographic boundaries. The consistent growth of EMC's information storage business reflects the way we live today".
Nortel gave the US markets considerable encouragement when it released strong fourth quarter results last week. Revenue for the quarter jumped 34 per cent from $US6.57 billion to $US8.82 billion and net profit rose from $607 million to $US825 million. However, after accounting for acquisition-related costs and other one-off charges Nortel lost $US1.41 billion in the quarter. A spokesman said the company experienced strong growth in optical Internet, wireless Internet and core IP networking.
Lucent could not sustain the good news and dragged the market down again with its report of a $US1.02 billion first quarter loss, which will lead to a restructuring and the loss of 10,000 jobs. A year earlier the telecommunications equipment manufacturer had made a profit of $US1.08 billion. Revenue slipped from $US7.91 billion in the previous first quarter to $US5.84 billion.
3Com suffered a decline in revenue during its second quarter (to December 1) from $US806.3 million a year ago to $US766.7 million and saw its net loss blow out from $US59.2 million in the first quarter of the last financial year to $US142.4 million. The poor performance was attributed to a "recent market slowdown in the telecom sector".
True to its warnings, NCR was unable to lift its fourth quarter revenue, which remained at $US1.7 billion, and suffered a decline in net profit from $US235 million a year ago to $US90 million. The slide was attributed to a shortfall in sales to users in the retail sector, and a spokesman noted the company has moved to take "cost cutting actions" in its retail business units.
Staging something of a resurgence, Sybase lifted fourth quarter revenue from $US237.1 million in 1999 to $US260.5 million in 2000. Net profit showed a similar increase from $US27.7 million a year ago to $US35.8 million, including a one-off gain of $US9.7 million from a deferred tax asset valuation allowance.
Citrix Systems lifted fourth quarter revenue 4.5 per cent from $US118.1 million a year ago to $US123.4 million. Net profit after accounting for abnormals slipped from $US34.0 million a year ago to $US19.4 million.
Siebel Systems more than doubled its fourth quarter revenue from $US275.9 million a year ago to $US581.6 million. Net profit showed a similar jump from $US31.1 million to $US79.5 million even after accounting for takeover costs of $US26.5 million.