Wall Street Beat: Tech shares up as Internet stocks rise

Tech stocks had an upbeat week as industry watchers appear to be looking at the positive side of earnings from Internet, consumer electronics and networking companies.

IT industry bellwethers have reported mixed results for the quarter ending in June. This week, earnings season continued with reports from LinkedIn, Yelp and Sony, among other companies.

Tech shares led markets to close up Friday, even though several indexes were down earlier in the day after a tepid report on the U.S. jobs market. The Labor Department said that although the unemployment rate fell last month to 7.4 percent, its lowest since 2008, the country added just 162,000 jobs in July, below the average monthly 202,000 this year.

The tech-heavy Nasdaq gained 0.36 percent to close up by 3.34 points at 15,658.36. The Nasdaq Computer Index rose 0.56 percent to 1735.89.

This week, professional social network LinkedIn was the tech star, announcing second quarter revenue of US$363.7 million, an increase of 59 percent year over year, while net income rose from $2.8 million to $3.7 million. LinkedIn membership grew to 238 million, rising 37 percent year-over-year.

LinkedIn shares spiked Friday afternoon by $22.58 to close at $235.58.

"Decisions made two years ago to re-write LinkedIn's code base have enabled rapid product innovation, which is driving much higher member engagement, creating a foundation that helped fuel tremendous self-service ad sales," said Canaccord Genuity analyst Michael Graham in a research note.

Online user business reviews site Yelp also came out with strong results, reporting that net revenue jumped 69 percent year over year to $55 million. The company's loss shrank to $878,000 from $2 million. The average number of unique visitors per month rose 38 percent year over year to approximately 108 million, while active local business accounts increased 62 percent year over year to approximately 51,400.

Yelp shares jumped Friday by $5.52 to close at $57.02.

Though LinkedIn and Yelp revenues are minuscule compared to Facebook's, their rising user statistics appeared to fuel the general good feeling toward Internet stocks. Last week, Facebook said mobile ad sales stoked revenue, which jumped 53 percent year over year to $1.81 billion, while profit totaled $333 million compared to a net loss a year earlier.

Facebook this week finally succeeded in clawing its way back to its May 2012 initial public offering price of $38, on Friday closing at $38.05.

Consumer electronics giant Sony, meanwhile, reported a profit, pushing forward with a turnaround that was sparked previously by a sale of assets including its U.S. headquarters and a Tokyo office complex. This quarter, improved results came from a combination of solid smartphone sales and a favorable foreign exchange rate.

The company reported that net profit was ¥3.5 billion (US$35 million) in the quarter, compared to losses of ¥24.6 billion in the same quarter last year, while revenue increased 13 percent to ¥1.7 trillion.

Sony's mobile products and communications business reported revenue of ¥389 billion, a 36 percent increase year over year, underscoring the importance of mobile communications to the future of just about any company in the consumer electronics business.

"Semiconductors for smartphones will see healthy revenue growth as demand for increased speeds and additional features continue to drive high-end smartphone demand in developed countries and low-cost smartphones in developing countries," said Nina Turner, research manager for semiconductors at IDC in a report this week. PC chip sales will remain weak, but as smartphone sales surge, semiconductor revenue worldwide will increase this year by 6.9 percent, reaching $320 billion, IDC said in the report.

Meanwhile, the wireless infrastructure segment of Alcatel-Lucent's business remained stable in the second quarter as the company continues efforts to focus on IP networking and ultra-broadband equipment. Revenue rose 1.9 percent to €3.61 million, driven by strong growth in sales of IP networking equipment, the company said. However, the company reported a net loss of €885 million (US$1.15 billion) for the quarter, weighed down by a charge of €552 million following a re-evaluation of assets, and restructuring charges of €194 million.

A strong week for tech stocks bodes well for confidence in the tech sector, as investors seem to be accentuating the positive aspects of what has been by most accounts a mixed quarter. But potential pitfalls remain.

Continued global macroeconomic uncertainty from a slowdown in China, the eurozone debt crisis and recession, Japan recession and the U.S. government spending cutbacks as a result of political compromise could all be factors weighing down IT, particularly spending that affects sales of components, IDC said in its report.

Wall Street Beat: Mobile is key to tech earnings

Tech earnings this week highlighted the importance of mobile communications to IT, as companies including Apple, Samsung, Facebook, AT&T and Texas Instruments reported mixed results for the quarter ending in June.

Apple and Samsung earnings underscored competition in the mobile market. Reporting Tuesday, Apple said revenue was up 1 percent year over year to US$35.3 billion, while profit declined 22 percent to $6.9 billion.

The lack of a new hit product, competition from Android-based devices and sagging sales overseas, particularly in China, hampered earnings for the quarter. Apple sales in China declined 4 percent year over year. The overseas results indicated a problem other IT companies face.

"The continued recession in Europe and slowing growth in China will offset improvements in the US, Japan, and some emerging markets," according to Forrester analyst Andrew Bartels, in a recent forecast for IT sales this year.

While Apple had a soft quarter, however, a refresh of its mobile product lines should bolster growth, analysts said. "We maintain our belief that Apple has a strong product pipeline, including a refreshed iPhone 5S, mid-tier iPhone, and iPad lineup that should result in solid earnings growth," wrote Canaccord Genuity analyst T. Michael Walkley in a research note. The launch of a lower-cost iPhone should also help Apple in emerging markets, Walkley noted.

Meanwhile, Samsung Electronics, reporting Friday, said that even though revenue and net earnings rose significantly year over year, tough competition in the mobile phone market and the need to boost marketing costs cut into results.

The company generated a profit of 7.77 trillion won (US$6.89 billion), up a whopping 50 percent year over year, as sales rose 21 percent to 57.5 trillion won. However, marketing costs associated with, among other things, launching its Galaxy S4 during the quarter brought operating profit down for the mobile unit by 3 percent even though sales increased.

Samsung has been edging out Apple in the hard-fought mobile phone market. A report from Strategy Analytics on Friday said that Apple's share of the smartphone market declined in the second quarter to its lowest level in three years, slipping to 13.6 percent in the quarter from 16.6 percent year over year. During the same period Samsung's market share rose to 33 percent from 31 percent.

However, Apple and Samsung face a similar problem: Their success in high-end smartphones means that mature markets are saturated. They face the tough task of getting users in developed markets to upgrade while coming up with devices tailored to emerging markets, some of which face slowing growth over the next few quarters.

The shift to mobile computing has implications for a wide variety of IT and Internet companies. Facebook on Wednesday said mobile ad sales helped fuel revenue, which skyrocketed 53 percent year over year to $1.81 billion, while profit totaled $333 million compared to a net loss of $157 million.

A year ago, the social networking giant had essentially no mobile revenue, but during the past quarter sales of mobile ads came out to 41 percent of total advertising revenue for the quarter.

Mobile communications also played an important part in AT&T's quarter. The company reported a rise in revenue as strength in its mobile business made up for flat-lining wireline sales.

The company Tuesday said it gained 632,000 wireless subscribers in the quarter, while mobile data sales increased almost 20 percent year over year. Total revenue increased 1.6 percent year over year to $32.1 billion. Excluding AT&T's former Advertising Solutions division, which was sold off, sales were up 2.6 percent. However, as operating expenses rose, profit declined to $3.82 billion, down from $3.9 billion.

Other tech companies reporting earnings this week included:

-- Texas Instruments. The chipmaker, noting weakness in the PC market, said revenue declined by 9 percent year over year to $3.1 billion. Net income, however, rose by 48 percent to $660 million as cost-cutting measures took effect.

-- Amazon, which reported that sales for the quarter rose 22 percent year over year to 15.7 billion. Operating income, however, declined 26 percent to $79 million. The good news was that its business in the U.S., which is expected to expand faster than overseas markets, increased and earnings in the region were up.

Scientists warn of 3D printing health effects as tech hits high street

A group of scientists have warned that 3D printers can harm humans if they’re not set up in the right environment, just a week after the first 3D printer was introduced to the high street.

The relatively new printing method has received a lot of press attention, with a wide variety of publications covering all the latest things made by 3D printers, from bathroom plugs to plastic figurines that can be made to look like anyone.

However, academics in America and France have released a paper warning that the significant number of particles emitted as a result of 3D printing can be hazardous to humans when they are inhaled.

The team of scientists from the Illinois Institute of Technology (IIT) and France’s National Institute of Applied Sciences found that thermal extrusion and deposition of plastics by a commonly available 3D printer emitted a large amount of very small particles, mostly less than 100 nanometres in diameter.

When ultrafine particles (UFPs) are inhaled they can end up in the lungs and even the brain.

“These small particles can cause inflammation in our respiratory system, or penetrate deep into our lungs and are small enough to enter our bloodstream,” lead author from IIT, Brent Stephens, told Techworld.

“Once in our bloodstream, they may interact with our cells, or may be deposited in sensitive areas such as bone marrow, lymph nodes, spleen, or heart. They can also access the central nervous system via our brains.”

According to the authors, a number of recent epidemiological studies have shown that elevated UFP concentrations are linked to adverse health effects, including cardio-respiratory mortality, hospital admissions for stroke, and asthma symptoms.

The team tested two different 3D printing materials (ABS and PLA) to see how many UFPs each one emitted when set to work on by a 3D printer.

They found that ABS emits 10 times as many ultra-fine particles (UFPs) than PLA.

The £700 Velleman K8200, which went on sale to high street customers through Maplin earlier this month, prints both ABS and PLA.

Velleman refused to respond to the scientific study because the exact 3D printer used in the experiments was not disclosed. However, the company did send Techworld a copy of the safety instructions that are distributed with its K8200 printer.

“PLA is a safe and non-toxic material, there are no known health safety risks when used in 3D printers,” the instructions read.

They continue: “When printing with ABS there is a distinctive “burned plastic" smell. This is quite normal but it may also cause headaches, respiratory- and eye irritation with sensitive people (although it is not toxic).”

Stephens told Techworld that ABS fumes have been shown to be toxic to rats and mice in a few studies. “There is a good chance that ABS-fed 3D printers may be more harmful than PLA-fed printers due to both higher emissions and likely higher toxicity,” he said.

The instructions go on to point out that the printer should only be used in a well-ventilated area and “advise” a fume hood is used when printing with ABS. They also say that fume extraction is mandatory for use in offices, classrooms and alike.

“The easiest way for most users to continue using their same printers is to operate them under a fume hood or exhaust ventilation system, similar to a commercial kitchen environment or a lab environment,” said Stephens. “I'm not aware of any filtration add-ons that have been devised yet to control emissions, but I think it's worth exploring as another solution.”

Wall Street Beat: Software a bright spot as tech results bring gloom

Though software sales provided a ray of light in otherwise mixed results this week, gloom settled over the tech sector Friday in the wake of bellwether IT quarterly earnings reports.

The broad Standard & Poor's 500 Index managed to close Friday at a record high of 1,692.09, but the tech-heavy Nasdaq dropped 23.66 points to 3,587.61, and the Dow Jones industrial average declined 4.65 points to 15,543.89. Of the five tech stocks on the Dow, only Intel traded up slightly, while Microsoft, IBM, Cisco Systems and Hewlett-Packard were down.

"Overall I'd say the earnings confirmed some common themes -- software is going to do better than hardware and services," said Forrester chief economist Andrew Bartels.

In Forrester's latest forecast for the global tech market, issued last week, Bartels lowered expectations for spending on IT goods and services to 2.3 percent growth measured in U.S. dollars, from the January estimate of 3.3 percent. Calculated in local currencies, the forecast looks better, at a 4.6 percent increase, but recession in Europe and slower growth in China is putting a damper on tech purchases by any measure.
IBM's earnings report on Wednesday was a good window into business tech spending and largely conformed to the big themes of the year, Bartels noted. IBM is considered a bellwether for the tech industry due to its geographic reach and giant portfolio of software, hardware and services. It is also the most heavily weighted stock on the Dow.

The company said second-quarter net income declined 17 percent from the year earlier to US$3.2 billion, while revenue dropped 3 percent to $24.9 billion. Though services and overall hardware sales declined during the second quarter, company officials stressed strength in software and big systems.

Software sales totaled $6.4 billion, an increase of 4 percent year over year. Middleware, including WebSphere, information management, Tivoli and Social Workforce Solutions (formerly Lotus), generated $4.3 billion in revenue, up 9 percent.

The company's Global Technology Services segment, however, suffered a 5 percent decline in revenue to $9.5 billion. Revenue for the Systems and Technology unit, which includes hardware products, was $3.8 billion, down 12 percent.

The big disappointment of the week was Microsoft, which Thursday said it took a whopping $900 million charge in the quarter to reflect unsold inventory of its Surface RT tablets. As the sagging PC market curbs sales of Windows, Microsoft is having trouble making headway in the booming markets for tablets and smartphones.

Overall revenue for the company was $19.9 billion, up 10 percent year over year. Net income was $4.97 billion, or $0.59 per share, compared with a net loss last year of $492 million, or a loss per share of $0.06.
In keeping with the global trend for a strong software market this year, Microsoft's application sales were strong. The Microsoft Business Division, which includes Office, had a revenue increase of 14 percent year over year, while sales for the Server & Tools unit increased 9 percent, boosted by demand for SQL Server and System Center.

In a departure from the good news for software, however, SAP reported some sales weakness. The business applications giant said Thursday that quarterly revenue increased 4 percent to €4 billion (US$5.3 billion) year over year, while profit rose 10 percent to €724 million. But while software and software-related service revenue rose 6 percent year on year to €3.3 billion overall, revenue from software alone dropped 7 percent to €982 million.

One problem for SAP is that while it is pushing its HANA in-memory database platform as a market leader for new types of analytics and data-processing, some customers may not be ready to embrace it yet, noted Forrester's Bartels.

On the components front, Intel reported a decline in earnings and revenue as the slumping PC market continued to hurt sales. Intel net earnings for the quarter plunged 29 percent from last year to US$2 billion, while revenue fell 5 percent to $12.8 billion.

The chip maker lowered its expectations for the year, forecasting sales to be flat, compared to its prior guidance for single-digit percentage growth.

Other tech giants reporting results this week included:

--Google, which said second-quarter net revenue, excluding payments to ad partners, was $11.1 billion, up year over year from $9.2 billion, while net income rose about 16 percent to $3.23 billion, or $9.56 a share. The results missed analyst expectations of $11.33 billion in revenue and $10.78 earnings per share. While the company is working mobile ads into its offerings, growth in its desktop advertising business is slowing.
--Yahoo, which reported a 46 percent increase in profit to $331 million. Revenue, however, was $1.14 billion, a 7 percent decline from last year. Though under CEO Marissa Mayer the company has tried to reinvent itself through acquisitions and has made efforts to control costs, it ultimately needs to boost sales to achieve real growth.

--Nokia, which despite reporting strong sales of its Lumia smartphones, suffered a 24 percent decline in revenue to €5.70 billion (US$7.48 billion). The company's net loss, however, was €278 million, smaller than the year-earlier loss of €1.53 billion.

Wall Street Beat: Software a bright spot as tech results bring gloom

Though software sales provided a ray of light in otherwise mixed results this week, gloom settled over the tech sector Friday in the wake of bellwether IT quarterly earnings reports.
The broad Standard & Poor’s 500 Index managed to close Friday at a record high of 1,692.09, but the tech-heavy Nasdaq dropped 23.66 points to 3,587.61, and the Dow Jones industrial average declined 4.65 points to 15,543.89. Of the five tech stocks on the Dow, only Intel traded up slightly, while Microsoft, IBM, Cisco Systems and Hewlett-Packard were down.
“Overall I’d say the earnings confirmed some common themes—software is going to do better than hardware and services,” said Forrester chief economist Andrew Bartels.
In Forrester’s latest forecast for the global tech market, issued last week, Bartels lowered expectations for spending on IT goods and services to 2.3 percent growth measured in U.S. dollars, from the January estimate of 3.3 percent. Calculated in local currencies, the forecast looks better, at a 4.6 percent increase, but recession in Europe and slower growth in China is putting a damper on tech purchases by any measure.
IBM’s earnings report on Wednesday was a good window into business tech spending and largely conformed to the big themes of the year, Bartels noted. IBM is considered a bellwether for the tech industry due to its geographic reach and giant portfolio of software, hardware and services. It is also the most heavily weighted stock on the Dow.
The company said second-quarter net income declined 17 percent from the year earlier to $3.2 billion, while revenue dropped 3 percent to $24.9 billion. Though services and overall hardware sales declined during the second quarter, company officials stressed strength in software and big systems.
Software sales totaled $6.4 billion, an increase of 4 percent year over year. Middleware, including WebSphere, information management, Tivoli and Social Workforce Solutions (formerly Lotus), generated $4.3 billion in revenue, up 9 percent.
The company’s Global Technology Services segment, however, suffered a 5 percent decline in revenue to $9.5 billion. Revenue for the Systems and Technology unit, which includes hardware products, was $3.8 billion, down 12 percent.
The big disappointment of the week was Microsoft, which Thursday said it took a whopping $900 million charge in the quarter to reflect unsold inventory of its Surface RT tablets. As the sagging PC market curbs sales of Windows, Microsoft is having trouble making headway in the booming markets for tablets and smartphones.
Overall revenue for the company was $19.9 billion, up 10 percent year over year. Net income was $4.97 billion, or $0.59 per share, compared with a net loss last year of $492 million, or a loss per share of $0.06.
In keeping with the global trend for a strong software market this year, Microsoft’s application sales were strong. The Microsoft Business Division, which includes Office, had a revenue increase of 14 percent year over year, while sales for the Server & Tools unit increased 9 percent, boosted by demand for SQL Server and System Center.
In a departure from the good news for software, however, SAP reported some sales weakness. The business applications giant said Thursday that quarterly revenue increased 4 percent to €4 billion (US$5.3 billion) year over year, while profit rose 10 percent to €724 million. But while software and software-related service revenue rose 6 percent year on year to €3.3 billion overall, revenue from software alone dropped 7 percent to €982 million.
One problem for SAP is that while it is pushing its HANA in-memory database platform as a market leader for new types of analytics and data-processing, some customers may not be ready to embrace it yet, noted Forrester’s Bartels.
On the components front, Intel reported a decline in earnings and revenue as the slumping PC market continued to hurt sales. Intel net earnings for the quarter plunged 29 percent from last year to $2 billion, while revenue fell 5 percent to $12.8 billion.
The chip maker lowered its expectations for the year, forecasting sales to be flat, compared to its prior guidance for single-digit percentage growth.
Other tech giants reporting results this week included:
Google, which said second-quarter net revenue, excluding payments to ad partners, was $11.1 billion, up year over year from $9.2 billion, while net income rose about 16 percent to $3.23 billion, or $9.56 a share. The results missed analyst expectations of $11.33 billion in revenue and $10.78 earnings per share. While the company is working mobile ads into its offerings, growth in its desktop advertising business is slowing.Yahoo, which reported a 46 percent increase in profit to $331 million. Revenue, however, was $1.14 billion, a 7 percent decline from last year. Though under CEO Marissa Mayer the company has tried to reinvent itself through acquisitions and has made efforts to control costs, it ultimately needs to boost sales to achieve real growth.Nokia, which despite reporting strong sales of its Lumia smartphones, suffered a 24 percent decline in revenue to €5.70 billion (US$7.48 billion). The company’s net loss, however, was €278 million, smaller than the year-earlier loss of €1.53 billion. 

Wall Street Beat: Icahn battle with Dell over buyout going down to the wire

With a shareholder vote scheduled for July 18, the battle over Dell’s $24.4 billion plan to go private intensified Friday as investor Carl Icahn and his affiliates issued an enhanced offer for the company.

Icahn and his partner, Southeastern Asset Management, issued a letter to Dell shareholders offering a warrant to buy a share in the company at $20 over the next seven years for every four shares that they sell now. Icahn’s plan calls for part of the company to continue to be publicly traded.

The new offer is in addition to the previous proposal to buy shares at $14 each. Making the calculation that shares will rise over $20 once the suggested proposal and new management is in place, Icahn said in the letter that the entire deal is potentially worth $15.50 to $18 a share for current shareholders.

In the letter, Icahn said that he and Southeastern are “completely committed to bringing in management that we expect to be far superior to Michael Dell who we believe has had an abysmal record during the last three years. We believe there would be several excellent candidates for this position who would be very interested in running this company once a clear mandate has been established.”

Michael Dell and his affiliates, Silver Lake Partners, are offering $13.65 in cash per share. Dell is betting that as a private company, free from the pressure of Wall Street scrutiny, it will have more room to execute its strategy to push into high-margin products and services and move away from the floundering PC market.

For the buyout plan to go through, it needs to be approved by 50 percent of shareholders not including Michael Dell. This amounts to investors holding a total of 42 percent of the company.

With the shareholder vote looming, the battle over Dell’s future has ramped up recently.

Earlier this week, Icahn pressed shareholders to exercise appraisal rights on the company’s value. The appraisal would require a Delaware state judge to issue an opinion on the company’s worth. It could also derail the deal.

Dell responded to Icahn’s suggestion for the appraisal with a scathing statement of its own.

“Pursuing appraisal involves substantial risks and costs,” Dell said. “If a sufficiently large number of shareholders seek appraisal and thus do not vote in favor of the acquisition (which is required to pursue appraisal rights), the merger agreement will be terminated, the merger will not occur, stockholders will not have the opportunity to receive the $13.65 per share cash merger consideration, there will be no appraisal rights, and stockholders will continue to bear the risks of holding their Dell shares. “

In addition, Dell pointed out, there is no assurance that a judge would value the company greater than what Dell is offering.

There is also no assurance that any new management that Icahn brings in would perform better than Michael Dell.

Three shareholder advisory groups this week, including Institutional Shareholder Services, advised shareholders to vote for the Dell buyout plan. The plan assures shareholders of a definitive value for their holdings and eliminates risks associated with Icahn’s proposal, they said.

“ISS recommends clients vote FOR this transaction, which offers a 25.5% premium to the unaffected share price, provides certainty of value, and transfers the risk of the deteriorating PC business and the company’s on-going business transformation to the buyout group,” ISS said Monday.

The other advisory groups recommending the Dell plan were Egan-Jones Proxy Services and Glass, Lewis & Co.

Over the past month, reports have surfaced indicating that Silver Lake was getting second thoughts about the deal, as the PC market worsens. However, Dell officials said Friday the vote is set to go ahead as planned. Dell had no comment on Icahn’s new offer Friday.

Dell shares closed Friday at $13.32, down by $0.03 for the day, on a generally up day for the markets.

Wall Street Beat: Tech sector faces turbulent market

Closing out June, tech stocks are up for the year but have not enjoyed the full fruits of a bull market that has boosted the Dow to its best first half since 1999, right before the dot-com crash.

 

The tech sector also faces what some analysts predict to be a rough few quarters, amid doubts about the economy and market forecasts for a tough year for tech sales.

 

Tech stocks were up Friday, with the Nasdaq Computer Index, which tracks more than 300 tech-related stocks, closing at 1615.46, up 2.21 percent. It was a mixed day of trading, however. Of the five tech bellwethers on the Dow Jones Industrial Average, Intel and Hewlett-Packard closed up for the day, while IBM, Microsoft and Cisco were down.

 

Unusually, compared to what's been happening so far this year, tech was up while other sectors were down Friday. The Dow and the Standard and Poor's 500 were both down for the day.

 

The market as a whole has done well this year so far, however, despite recent turbulence caused by remarks from the Federal Reserve Board. Since May, Fed officials have cautioned that as the economy shows signs of recovery, they may wind down initiatives mean to fuel the recovery from recession. These include the Fed's policy of maintaining low interest rates as well as its "quantitative easing" program of buying about $85 billion in bonds per month to boost the stock market.

 

Last week, for the first time, Fed Chairman Ben Bernanke laid out a timeline for winding down purchases of mortgage bonds and treasuries, possibly next year. The remarks led to a big stock selloff, with the broad Standard and Poor's 500 index declining 2.5 percent last Thursday, its worst drop up to that point since November 2011. Still, stocks have done well this year, with the Dow up by about 14.5 percent and the S&P up about 13 percent. In comparison, the Nasdaq Computer Index is up only 4.5 percent for the year.

 

It's a far cry from last year, when tech led markets for much of the year. This year, forecasts of relatively slow sales have hurt confidence in tech. The hardware sector is especially under pressure as users spend more time on tablets and smartphones, eschewing pricier desktop and notebook computers.

 

This week, Gartner forecast that worldwide desktop and notebook computer shipments will total 305 million units in 2013, a 10.6 percent decline from 2012. It expects the PC market including ultramobiles to decline by 7.3 percent.

 

The downward trend is offset by tablet shipments, which are expected to increase 67.9 percent, reaching 202 million units, while the mobile phone market will grow 4.3 percent, with shipments of more than 1.8 billion units, Gartner said.

 

So while there is good news amid the gloom, the shift from traditional PCs represents a wrenching shift for the market.

 

"Consumers want anytime-anywhere computing that allows them to consume and create content with ease, but also share and access that content from a different portfolio of products. Mobility is paramount in both mature and emerging markets," said Carolina Milanesi, research vice president at Gartner, in the report.

 

There will be winners and losers as the market changes. For example, BlackBerry's attempts to recapture its past glory as a mobile market leader are faltering.

 

On Friday, BlackBerry said it suffered a $84 million loss during the three months to June 1. The company shipped 6.8 million smartphones in the quarter, 2.7 million of which were running the new BlackBerry OS. But many analysts were hoping for a profit and sales of at least 7.5 million phones. CEO Thorsten Heins asked for more time in a conference call to discuss the results, saying that "BlackBerry 10 is still in the early stages of its transition."

 

But the market reacted violently, as BlackBerry shares plunged by 27.76 percent to close at $10.46.

 

Meanwhile, the software market was supposed to be a bright spot for tech this year, but recent results point to a rough quarter for enterprise vendors. Last week, though Red Hat reported a solid quarter, Oracle revenue was soft, and Tibco's sales and profit declined year over year.

 

Though Oracle reported a 10 percent year-over-year increase in profit, to $3.8 billion, revenue for the three months ending in May was flat at $10.9 billion. Tibco said revenue for the period ending June 2 was $245.8 million, down from $247.4 million a year earlier, while net income was $8.7 million, down from $26.5 million.

 

Both companies gave conservative guidance for the next quarter. As earnings season gets under way in earnest in a few weeks, other tech vendors are likely to do the same.

 

"With the up and down gyrations of Japan, Europe still bumping along the bottom and angst (which we believe is premature) over Fed tightening in the U.S., no sane CFO will put out a big September quarter guide," wrote Canaccord Genuity analyst Richard Davis in a research note. "Investors' nerves are still raw from the choppy March quarter. With software modestly underperforming the market so far this year, the likely reaction from investors will be to sell first and wait for an obvious catalyst to step in."

 

 

Layoffs hit Sesame Street

Layoffs are coming to Sesame Street.

The group's statement on Wednesday said the layoffs were necessary to "strategically focus our resources" because of "today's rapidly changing digital environment."

The layoffs will not affect any of the performers known to the audience.

The group is a nonprofit organization. According to its financial statements, its total revenue in the fiscal year that ended in June 2012 was down 15%. Its operating loss more than doubled to $24.3 million.

The group's statement said "We remain optimistic about our future."

Related: Thanks Mitt - Big Bird costumes sell out

In fiscal 2012, the group received $46.2 million from licensing revenue from toys and other products based on its characters such as Elmo and Big Bird. It also received $33.8 million from royalties and fees, and $33.8 million in program support from corporate and foundation donations and the government.

Sesame Street first aired in 1969 and now appears in more than 150 countries.

Twitter: @sajilpl

Sallie Krawcheck on trusting Wall Street again

Sallie Krawcheck, former investment bank executive, just bought a network for professional women, 85 Broads.

Can investors trust Wall Street again?

If we mean by "Wall Street" large financial institutions, I'd say that they are no doubt safer today than before the Dodd-Frank law and the new financial regulatory changes, but it is still unclear whether they can make it through a significant downturn like we had in 2008.

If we mean financial advisers, in my experience running Smith Barney at Citi (C, Fortune 500) and then Merrill Lynch, I found that the vast majority of them are good people, looking to do good things and committed to building long-term relationships with their clients. You know, the cartoon representation of so many of them as short-term-focused is wrong.

For example, back in 2007 and 2008, Citi had sold some financial products that we believed would only go down a few cents in a bad market, but which actually [lost most of their value]. Instead of reading investors the fine print, the advisers pounded the management team to partially reimburse their clients for our stupidity. I advocated for that too, the bank eventually relented, and I subsequently lost my job.

Many of the people who were on Wall Street in 2007 and 2008 are still there making big money. How is that possible?

A number of people lost their jobs at Citi, including the CEO, the head of the corporate investment bank, desk heads, and traders.

Related: 101 ways to build wealth

Is Wall Street getting any better at managing risk to avoid catastrophe?

Everybody's learned something, but are we going to have the breakthrough to reduce risk in the system? There's a reason crowdsourced problem-solving works: You put a problem to groups who have different experiences, and they'll often solve dilemmas that the experts couldn't. The chemists solve the physicist's problem.

Part of me wants to open-source bank risk so that we have some sharp college kids in some corner of the world trying to solve it, as opposed to the same folks with the same tools. It sounds fanciful, but there is not a tremendous amount of new thinking on these issues of risk. The problem is, banks will never allow positions or performance information to be made public.

 

What's the next financial risk out there that people don't broadly recognize?

The first one I would point to is bond funds. There is still an incorrect but widely held view that you don't take particularly big losses on bonds unless there's a credit issue. [This is true only if you can hold to maturity.] Bond funds are different. If the economy gets better and interest rates increase, bonds may suffer losses. There's going to be some surprise out there.

Related: Are we at risk of another banking crisis?

You've also raised concerns about money-market mutual funds.

The funds do take on risk. It's a $2.6 trillion market. Lots of individual investors participate. They believe it's cash, in part because the brokerage system puts it into CASH on their statement. And they redeem 100¢ on the dollar in good markets and bad.

But back in 2008, a money-market fund "broke the buck" [couldn't redeem for 100¢]. If we learned anything in the downturn, implicit guarantees not backed by capital are very bad things. What worries me about money funds is managers who take on more risk just to get a tiny bit more return. It's not worth it.

Do you believe high-speed computerized trading gives Wall Street an unfair advantage over individual investors?

It's faster. I would make sure to worry about first things first and second things second, and last things last.

So first things first. How do I want to live? How much money do I need to do it? Can I reasonably get there? Then you've got to go to second things. Do I have the right portfolio to get me there? Am I properly diversified? Third things: Are you in a mutual fund that has an average management fee of 1.2%, 1.3%, when you could be in an ETF that has an expense ratio of 0.3%?

Once you've done all that, then let's start to talk about the fractions of pennies that the institutional traders are getting over individual investors. Most individuals really shouldn't be trading often anyway.

Related: Money-market funds aren't as safe as you think

What about the "flash crash," when computers seemed to cause the Dow to briefly plunge 9%.

It was very scary, but the good news was that there was not a tremendous amount of money lost by individual investors.

You first built your name as a stock analyst covering Wall Street. A MONEY reader asks whether banks are a decent investment yet.

Today the markets feel fine, right? The economy feels good enough. If the economy and the markets are in good enough shape, overall banks will be in good enough shape.

One caveat: Individual banks are difficult to analyze. They're very complex. Even when they give out 100-plus pages of 10-K and 10-Q disclosure, it is really impossible to know what's on their balance sheet at any point in time because the banks' individual loans and trading positions can change quickly between earnings reports. And as we've learned, idiosyncratic accidents do happen.

So my advice is, if one wants to invest in financial institutions, own a group of them, or an ETF that owns them, rather than individual banks. That's what I do.

Related: Best advice now for getting richer

You've talked about banks alienating customers with high and hidden fees. Why do they do it?

Banks, having had their earnings reduced, are doing what companies do: looking to replace earnings.

What new fees should bank customers expect?

It's well known that if you transfer a credit card balance, you can get a low teaser rate that will then move up. What is less understood is that when you give a deposit to a bank, there can be a teaser rate that is later taken down.

In this low-rate environment, the numbers are not large. But if you look for a future fee stream, it would be that. The average checking-account agreement is, I believe, 111 pages. You can find the formula for how the leap year affects the calculation of your interest payment. It's harder to figure out the rate they'll actually pay.

Twitter: @sajilpl

Wall Street Beat: Software vendors report mixed results amid market tumult

Against a backdrop of market tumult, enterprise software companies this week reported mixed quarterly results.

Though Red Hat reported a robust quarter, Oracle revenue flatlined and Tibco’s sales and profit declined year over year.

Meanwhile, shares of tech companies plunged Thursday along with the rest of the market, as investors took in the news that the U.S. Federal Reserve may taper off some initiatives to support markets as it sees the economy improve. For example, Fed Chairman Ben Bernanke for the first time suggested a timeline for winding down purchases of mortgage bonds and treasuries, possibly next year.

Though the Fed still plans to keep interest rates low, stocks plunged Thursday. The broad Standard and Poor’s 500 index declined 2.5 percent, its worst drop since November 2011. The Dow Jones Industrial Average ended down 353.87 points, or 2.3 percent, with all of its 30 components in negative territory, including its five tech stocks: Hewlett-Packard, Microsoft, Cisco, IBM and Intel.

Stocks again declined in Friday morning trading, though not sharply. The only tech stock in the Dow that was trading higher was Cisco, up by $0.04 to $24.22. The Nasdaq Computer index, which tracks more than 300 tech-related securities, was down by 1.29 percent to 1603.27.

Though software has been a bright spot for tech, vendors are heading into what is expected to be a bumpy ride for the economy and the market.

“While we are incrementally more optimistic about the macro demand for software IT, we fully recognize that the world economy is still fragile and it is improving haltingly,” said Canaccord Genuity analyst Richard Davis in a research note about Oracle. “This means that summer 2013 will likely be one full of a confusing mishmash of data points.”

Though Oracle Thursday reported a 10 percent year over year increase in profit, to $3.8 billion, revenue for the three months ending in May was flat at $10.9 billion. Oracle tried to highlight the good news, saying that SaaS (software as a service) revenue growth was up 50 percent. However, SaaS is only a small part of new software licenses and cloud software subscriptions, which rose a tepid 1 percent to $4 billion. New software licenses are key for growth for a software company, so the weak increase has investors worried. Oracle shares declined by $2.71 in Friday morning trading, to $30.50.

Oracle maintenance fees, meanwhile increased 6 percent to $4.4 billion, providing a cushion for the company, but hardware revenue continued to decline, dropping 9 percent to $1.43 billion, as Oracle restructures its offerings to focus on high-end systems.

Oracle executives noted that economic concerns appeared to put a damper on enterprise spending.

“When we saw weakness, we saw weakness in all of our software lines,” CEO Larry Ellison said in a conference call to discuss results. “It was clearly an economic issue, not a product competitiveness issue.”

Still, some industry insiders remain optimistic even in the face of a tough economic environment.

“We see a gold rush coming,” said Tibco CEO Vivek Ranadivé in an interview after the company announced quarterly results Thursday. Big data analytics is the “secret sauce for the most successful retailers,” Ranadivé said. Vendors that can show they have superior products that allow real time analysis of data integrated from a variety of sources—including mobile devices—will be able to take advantage of enterprises’ rush to implement big-data applications, he said.

Nevertheless, Tibco reported a tough quarter. Quarterly revenue for the period ending June 2 was $245.8 million, down from $247.4 million a year earlier, while net income was $8.7 million, down from $26.5 million.

Tibco, which offers a portfolio of middleware and analytics software geared for the integration and real time analysis of massive amounts of data, is not being hurt by economic concerns, Ranadivé insisted, but has had sales execution issues, which it has taken pains to resolve. Top sales executives have been replaced and the sales process has been reviewed and overhauled “from A to Z,” Ranadivé said.

“In my many conversations with customers, I have not seen those customers unwilling to spend money,” Ranadivé said in a conference call with analysts to discuss results. “However, what is the case today is that software providers of every stripe need to demonstrate value to sell their products. They need to showcase their differentiation and more importantly, make precisely clear how they will move the needle for their clients in terms of revenue or market share gains, specific and lasting cost reductions or improvements in managing risks.”

Tibco has a strong pipeline of deals in the works, Ranadive added, and expects to see results from its overhaul of its sales team over the next few quarters.

Meanwhile, open-source software vendor Red Hat, reporting quarterly results Wednesday, showed strong gains in both sales and profit. Total revenue for the quarter was $363 million, a year over year increase of 15 percent, while net income rose to $40 million from $37 million.

“We delivered mid-teens revenue growth driven by customer demand for innovative open source technologies based on a high-value subscription model,” said CEO Jim Whitehurst in a press release. “We continued to execute against our strategy of significantly expanding our addressable market in the new cloud-centric data center.”

Tech companies whose quarter ends in June, meanwhile, will report results in about a month. Those results may reflect some of the economic uncertainty that has arisen this month.

 

U.K. regulator gives Google 35 days to scrap its remaining Street View data

A U.K. regulatory group is giving Google 35 days to delete what remains of the data collected by its Street View cars in the U.K., and is using the threat of legal action to compel the company to comply.

The request, which was served to Google in the form of an enforcement notice from the Information Commissioner’s Office, the U.K. government’s data and privacy regulator, follows a reopening of an investigation into Google’s Street View project.

In 2010, that investigation revealed “a significant breach of the Data Protection Act,” when Google Street View cars collected payload data through the company’s Wi-Fi mapping efforts in the U.K., by scraping personal data including emails, URLs and passwords.

Google agreed to delete the payload data following that investigation, but when reaching this week’s decision, “the ICO also considered the discovery of additional disks containing payload data, which were located by Google while the reopened ICO investigation was in progress,” the group said Thursday in a statement.

“Today’s enforcement notice strengthens the action already taken by our office, placing a legal requirement on Google to delete the remaining payload data identified last year within the next 35 days and immediately inform the ICO if any further disks are found,” the ICO said.

“Failure to abide by the notice will be considered as contempt of court, which is a criminal offense,” the ICO said.

Google claims to be cooperating. “We work hard to get privacy right at Google,” a spokeswoman said in a statement. “But in this case we didn’t, which is why we quickly tightened up our systems to address the issue.”

“We cooperated fully with the ICO throughout its investigation, and having received its order this morning we are proceeding with our plan to delete the data,” the company said.

“The project leaders never wanted this data, and didn’t use it or even look at it,” the spokeswoman added.

Based on the ICO’s investigation, the breach failed to meet the level required to levy a financial penalty, the ICO said.

That assessment differs somewhat from that of German regulators, who levied a fine of €145,000 (US$190,000) against Google in April for the company’s gathering and storing of emails, photos, passwords and chat protocols from unprotected Wi-Fi networks using Street View cars.

In the U.S., Google has already entered into a settlement to pay $7 million related to complaints from dozens of states about unauthorized collection of personal data transmitted over Wi-Fi networks.

Google must be very careful about how it collects data going forward, according to the ICO.

“The early days of Google Street View should be seen as an example of what can go wrong if technology companies fail to understand how their products are using personal information,” said Stephen Eckersley, head of enforcement at ICO, in a statement.

“The punishment for this breach would have been far worse, if this payload data had not been contained,” he said.