January 26, 2012
As I mentioned in my blog on January 10, 2012, on “The Ten Potential Developments That Could Shape The Tech Market In 2012,” I was watching closely last week and this week to see what the Q4 2011 financial results of IBM, Microsoft, EMC, SAP, and others were saying about the state of tech demand coming into 2012. Overall, they were about what I expected, which is to say, slower growth than in earlier quarters in 2011 but still positive growth. As such, they countered some though not all of the negative picture presented by Oracle's weak results in its quarter ending November 30, 2011 (see December 21, 2011, "Oracle Delivers A Lump Of Coal To The Tech Market, But It's Too Soon To Call It A Harbinger Of A Tech Downturn").
Here are my key takeaways:
- Corporate software market is still showing strength. While IBM's overall revenues were up just 2%, IBM's software group revenues were up 9%, with its Websphere products up 21%. Microsoft's revenues rose just 5%, but its revenues from sales to business of servers, tools, and applications rose by 10%, with servers and tools and Microsoft Dynamics both up by 11%. On January 25, Computer Associates reported a 10% increase in its revenues, and EMC's software revenues had (by our estimates) a 20% gain in its software revenues, led by VMWare's 27% growth. On January 26, SAP’s license revenues in euros rose by 16%, with total revenues rising by 11%. So, the corporate software market was in much better shape at the end of 2011 than Oracle's numbers of 2% license revenue growth and 7% software revenue growth implied.
- Computer equipment market is at best slowing significantly, if not in decline. IBM's Systems & Technologies group had an 8% decline in its revenues, with server revenues down 10% and storage device revenues down 3%. EMC does not break out its storage hardware numbers from its storage software numbers, but we estimate that EMC's storage hard revenues rose by 3% to 5%. The 10% decline in the revenues of Oracle's Sun division and its 14% drop in hardware revenues is looking like a harbinger of tough times for other server vendors like Dell, HP, and Fujitsu.
- The IT services market is mixed, depending on the vendor. IBM's IT consulting and outsourcing revenues grew by just 3% in Q4 2011. On the other hand, Infosys (see Fred Giron's blog, "Stormy Weather's Ahead For The IT Services Industry?"), TCS, and Wipro reported Q4 2011 revenue growth that ranged (in US dollars) from 12% for Wipro to 24% for TCS. Those results were in line with Accenture's 17% growth for its quarter ending on November 30, 2011. Other services vendors like Cognizant and Capgemini are likely to have revenue growth in the same range. On the other hand, vendors like CSC and HP are likely to post revenue growth in the low single-digit range, like IBM.
- Corporate PC market is feeling the impact of Apple. While the major PC vendors like Dell, HP, and Lenovo will not release their results for several weeks, Microsoft's reported 6% decline in Windows revenues are pointing to similar declines in PC vendor revenues. Microsoft did indicate that sales of Windows to business rose while those to consumers fell. Meanwhile, Apple reported a 22% increase in its Mac revenues and a 99% increase in its iPad revenues, with sales to businesses and business users likely to have risen by at least this much. Confirming that trend, Apple officials during the earnings call rattled off a long list of corporate customers. As my colleague Frank Gillett noted in his blog post today ("Apple Infiltrates The Enterprise: 1/5 Of Global Info Workers Use Apple Products For Work!"), Apple is clearly growing in the corporate market at the expense of Wintel PCs and tablets.
The implications for the 2012 tech market of this first wave of Q4 2011 financial results are in line with our forecast — a slight slowdown in growth due to European economic and financial problems, but still reasonably good growth prospects.