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The No-Good Week in Tech’s (Hopeful) Trip to a Bright Future

 

 

Friday, April 22, 2016

The New York Times

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The New York Times

Friday, April 22, 2016

Daily Report
The No-Good Week in Tech’s (Hopeful) Trip to a Bright Future | Judging from the way the technology industry hypes itself, tech has a bright future, and always will. This week is a different matter.
On Monday IBM reported a 21 percent profit decline. Intel came out with lower than expected earnings on Tuesday, along with word that it would lay off 12,000 people. That same day Yahoo, which is trying to sell core parts of itself, reported declining revenue and cash flow.
Then on Thursday, Microsoft said its most recent quarter resulted in slightly lower revenue and sharply lower net income. Alphabet, the parent of Google, reported increased revenue and profit, but still disappointed Wall Street by earning less than expected. Google’s own transition to selling cloud services has moved slowly.
It might seem O.K. to sneer at the companies that increasingly run much of our lives, but a deeper reading of the reports shows an industry in transition, and perhaps getting ready to get even bigger.
Of course, each unhappy company is unhappy in its own way, and Yahoo has a very particular form of sadness. For over a decade it has tried to figure out if it was a technology company or a media company, succeeding in neither while holding a sizable audience.
The others, however, are each coping with transitions: All save Google are dealing with a transition to cloud computing, and the diminishing importance of personal computers at home and in the office.
Even IBM counted on its software being consumed in a world where people used PCs. Now, the old services and hardware business are in trouble, but it showed progress in selling cloud and artificial intelligence services. The company also almost doubled its cash on hand, to $14 billion, in just one quarter.
Microsoft has to adjust to selling fewer PC operating systems and making money off its cloud, and before Thursday’s slip saw its shares near a 16-year high. It has $105 billion in cash, up $9 billion in the last three quarters.
Google may not have made premium profits on some ads, but as a recent report noted, Google and Facebook together get 85 percent of online advertising dollars.
Wall Street appears to be worried that Google increased its head count over the last quarter, but net income per employee was $65,616 in the recent quarter, up from $63,426 a year ago. Earlier this week Goldman Sachs, considered pretty good at making money, had per-employee net earnings of $31,095. Google also bumped the cash it has on hand by about $2 billion over the quarter, to $75 billion.
All these cash stockpiles look increasingly like war chests: If it’s tough at the giants in tech, it’s probably harder at some of the hopefuls. On Wednesday Bill Gurley, a noted venture capitalist, posted a long critique of the overvalued start-ups — the “unicorns” with imputed values of $1 billion or more before going public, or even making money.
If the new hopefuls don’t make it and have to sell at big markdowns compared with their once-lofty valuations, there are a few big tech companies that have gathered the cash to buy them.
Alphabet’s stock price on the Nasdaq MarketSite in New York in February. On Thursday, as soon as its earnings were released, the stock fell about 5 percent.

Alphabet Earnings Disappoint as Google Ad Clicks Cost Less

By DAVID STREITFELD

Revenue for the Google holding company was about $150 million less than expected.

Microsoft is pinning its future on the business of renting computing infrastructure to other companies, where it has become a credible No. 2 to Amazon.

Microsoft’s Cloud Business Falls Short of Investors’ Hopes

By NICK WINGFIELD

Both revenue and earnings were short of analysts’ forecasts, and the company’s shares fell after hours.

A small interactive robot from IBM’s Watson A.I. department at CeBit, the digital business fair in Hanover, Germany, last month.

IBM Results Show Progress in Cloud and Data Analysis

By STEVE LOHR

The company reported a 21 percent decline in first-quarter earnings for the first quarter, though operating earnings per share were above estimates.

Brendon Villalobos demonstrates gloves he made that translate hand gestures into computer text input with the help of Intel’s latest sensor-laden chip package, Curie.

Intel to Cut 12,000 Jobs as PC Demand Plummets

By QUENTIN HARDY

The company, the largest semiconductor maker, will lay off 11 percent of its work force as it shifts to supplying chips for phones and other devices.

The first bids for Yahoo’s core Internet business were due this week, and Verizon Communications was widely viewed as the leading contender.

Yahoo’s Troubles Mount, and Revenue Shrinks, as It Vets Suitors

By VINDU GOEL

The company’s first-quarter results put more pressure on it to find a buyer quickly for its Internet operations.

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