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Wall Street trend: enterprise trumps consumer IT sales

Wall Street trend: enterprise trumps consumer IT sales

Repeating what has been a familiar pattern for the past six months, tech earnings and market forecasts this week show that while enterprise IT sales, especially for software, are booming, consumer demand for PCs is flagging.

Salesforce.com Thursday reported healthy fiscal fourth-quarter sales, which increased 29 percent from the year-earlier period to US$457 million. The company, whose tagline is "the enterprise cloud computing company," raised its forecast for the fiscal year as its charismatic CEO, Marc Benioff, crowed about the company's outlook.

"The current outlook puts salesforce.com on track to be the first enterprise cloud computing company to report more than $2 billion in revenue," Benioff says in a statement. "While it took us a decade to achieve our first billion dollars, we anticipate reaching $2 billion just three years later."

Salesforce shares midday Friday were up $4.99 to $139.31.

CAD and CAM software maker Autodesk also reported healthy fiscal fourth-quarter results Thursday. Revenue increased 16 percent year-over-year to $528 million. Profit increased from $50.1 million to $61.6 million.

"We closed the year with solid momentum and double-digit quarterly revenue growth in all of our geographies and all of our business segments," says Carl Bass, Autodesk president and CEO, in a statement. "We're seeing a global increase in demand for 3D design, engineering, and entertainment tools."

Autodesk shares were up midday Friday by $2.44 to $42.87.

The weak part of the tech market, on the other hand, was highlighted this week by Hewlett-Packard, the world's biggest IT company on the basis of sales. HP Tuesday reported sales that were hurt, to a large degree, by weak PC demand.

HP, with its large portfolio of services and hardware and wide geographical market spread, is involved in virtually all areas of IT around the world.

HP shares tanked Wednesday, a day after its announcement, dropping $4.64 to close at $43.59, though its stock drifted up Friday along with the rest of the market.

Worldwide PC microprocessor shipments, an indicator of how the hardware market is doing, flagged in the fourth quarter last year according to an IDC report Thursday.

PC microprocessor shipments in the calendar fourth quarter of 2010 were down by 0.04 percent from the third quarter and down 0.21 percent from the year-earlier quarter, IDC says. For 2011, IDC predicts growth in microprocessor shipments due to increasing sales of mobile devices, but the increase will be much lower than last year.

For 2011, IDC forecasts 10.1 percent growth, compared to a 17.1 percent increase last year. It's not just tablets that are siphoning off sales of PCs. Concerns about the economy and consumer spending play a part.

"The effects of emerging devices, like media tablets, and economic concerns in Europe and the U.S., lead us to be conservative in our overall outlook," says Shane Rau, director of Semiconductors: Personal Computing research at IDC.

Investors apparently overlooked the weak aspects of the IT market this week, focusing on the good news. Salesforce was credited with helping a surge in tech stocks midday Friday, as the IT-heavy Nasdaq jumped 30 points to 2768.

In addition, macroeconomic news may be helping confidence just as much if not more than the good news about enterprise IT sales. Fears of an oil shortage were eased Friday as Saudi Arabia raised oil output to make up for Libyan exports disruption caused by political unrest. Midday Friday the Dow was up by 58 to 12,126 and the S&P 500 was up by 12 to 1,318.


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