Google earnings exceed expectations
Google fourth-quarter profit surged to a sevenfold increase, accelerating the financial gains that have quickly turned the online search engine leader into a Wall Street favorite.
SiliconValley.com reported (1 Feb) that Google has that it earned US$204.1 million, or 71 cents per share, during the final three months of 2004. That compared to net income of US$27.3 million, or 10 cents per share, at the same time in 2003.
Revenue for the period totaled US$1.03 billion, more than doubling from $US512.2 million in the prior year. After subtracting commissions paid to other web sites in its advertising network, Google's fourth-quarter revenue worked out to $US653.5 million, more than doubling from a comparable figure of $US296 million in the previous year.
SV.com observed that Google was getting rich off a system that requires advertisers to bid for the right to have their web links displayed alongside search results. The advertisers pay Google and its partners, which include AOL and Ask Jeeves, whenever visitors click on the commercial links.
Google's stock has emerged as one of the US's priciest because investors are betting the company's iconic search engine will continue to attract hordes of advertisers, producing breakneck earnings growth, according to SV.com.
In a telling sign of how quickly Google's business is growing, says SV.com, the company's fourth-quarter revenue rose 28 percent from the third quarter, with investors focusing on Google's sequential quarterly growth for signs of a sales slowdown -- something that hasn't cropped up yet. Google's growth curve is outstripping Yahoo's -- the rival to which it is most often compared. Yahoo's fourth-quarter revenue increased 19 percent from the third-quarter.
The report says that in another bullish sign, Google generated 51 percent -- $US530 million -- of its fourth-quarter revenue from its own web sites. Advertising on its own sites is more valuable to Google because it doesn't have to share the money with its business partners.
Google's success has intensified the competition from Yahoo, software giant Microsoft and a host of smaller companies that have introduced rival products. Google has maintained its leadership, although Yahoo has narrowed since unveiling its own search technology nearly a year ago. Microsoft is stepping up its threat with a multimedia advertising blitz to promote a new search engine on its MSN site.
And, SV.com reports that Google management has also emphasised the company will continue to invest heavily in developing new technology -- a commitment that theoretically could depress earnings and drag down the stock. The company spent US$87.4 million on research and development in the fourth quarter, nearly tripling from US$28.5 million in the previous year.
Google's investments already have produced a raft of new products as part of an effort to make the company less dependent on ad revenue from its search engine. During the past year, Google's diversification has included: free e-mail with so much storage that competitors quickly responded by upgrading their offerings; a tool for searching computer hard drives; and an ambitious project to index millions of books in its search engine.
For all of 2004, Google earned US$399.1 million on revenue of US$3.19 billion, In 2003, the company earned US$105.6 million, or 41 cents on revenue of US$1.47 billion.
Kodak debt downgraded
US Ratings firm Fitch has junked Eastman Kodak's credit rating, saying that its progess in digital imaging may not compensate for the decline in its traditional film-based business, reports SiliconValley.com (1 Feb.)
The report says that Kodak's senior unsecured debt was downgraded by Fitch to double-B-plus -- its highest speculative-grade rating -- from triple-B-minus, its lowest investment-grade rating. The outlook remains negative.
Analysts said Kodak is making continued progress in its digital strategy, but Fitch sees a decline in Kodak's traditional business in 2005 and believes the company won't make its operating targets.
SV.com says the Fitch downgrade came a day after rival Moody's Investors Service put Kodak's Baa3 rating -- the lowest investment grade rung -- on review for downgrade, and Standard & Poor's said its triple-A-minus on Kodak would remain on its CreditWatch with negative implications.
Moody's said its move was prompted by the company's announcement of its plan to acquire Creo, a Canadian supplier of commercial printing prepress systems and software, for about US$900 million in cash.
It's the expected final piece in the US$3 billion acquisition program Kodak announced several years ago, and it gave the latest boost to bondholders fears that the current merger and acquisition craze in corporate America will result in lower credit ratings
SBC cutting 13,000 jobs after AT&T merger
US telco SBC Communications has said it expects to eliminate about 13,000 jobs after its US$16 billion acquisition of AT&T closes, but the telephone company stressed that many of those positions can be cut through attrition rather than layoffs.
According to SiliconValley.com (1 Feb) the projection came during an occasionally heated meeting with investors a day after SBC announced plans to acquire AT&T, its former corporate parent, in a deal that would create one of the world's biggest telecommunications companies on numerous fronts.
The cuts would come in addition to existing plans at the two companies to eliminate at least 12,000 jobs before the merger is finalised at least a year from now. Combined, the 25,000 expected cuts represent about 12 percent of the current work force at the two companies.
SBC executives also offered a more optimistic projection of how long the deal might take to gain approval from federal, state and foreign regulators, saying the merger should be completed by ``early'' 2006. On Monday, the target closing date was put closer to mid-2006.
SBC said the divisions which would have excess staffing following the merger included about 5,100 from management of the long-distance and local networks. Another 5,100 would be cut from sales, order provisioning, billing inquiry, and other forms of customer support.
The report says that AT&T already planned to eliminate at least 5,000 of its 47,000 jobs this year, and that those cuts likely will involve layoffs in the customer call centres which are being closed as AT&T retreats from the traditional consumer phone business. More cuts are expected in other operations as well.
TiVo president resigns
TiVo, the digital video recorder (DVR) maker facing growing competition from cable television providers, has announced the resignation of the company's President Marty Yudkovitz, only weeks after Chairman Michael Ramsay said he planned to step down as chief executive.
The New York Times/Reuters report (1 Feb.) that TiVo has no immediate plans to replace Yudkovitz, a television industry veteran who was hired in 2003 to build closer ties between TiVo and major TV players. He resigned to spend more time with his family, but will stay on as a consultant
The NYT says Yudkovitz joined TiVo at a time when analysts believed the Alviso, California-based company needed to offer its system to more cable and satellite broadcast viewers in order to boost subscriptions to its digital video recorder service.
More recently, TiVo has introduced a growth strategy based on spurring users to buy their set-top box on their own, and has suggested that its future does not hinge on deals with cable or satellite. At the same time, cable companies have started offering similar services at cheaper prices than TiVo, reports the NYT.
The company's set-top boxes can pause and rewind live TV shows and save dozens of hours of programs.
EMC whistleblower initiates lawsuit
EMC allegedly tried to withhold information about faults in its Symmetrix storage systems from customers in the hopes of avoiding millions in replacement charges, according to a lawsuit from an EMC employee.
The Register in the UK reports (2 Feb.) that Jack Wade has lobbed serious charges against EMC in a lawsuit filed with the Franklin Country Common Please Court in Ohio. The worker claims that EMC forced him to withhold information about Symmetrix flaws from three customers. The situation was so disconcerting to Wade that he suffered a nervous breakdown and went on disability.
The Register says that the document charges that EMC defrauded Bank One, the Ohio Department of Administrative Services and Convergys Corp. by selling the organisations old Symmetrix systems when the companies expected to receive new kit.
An EMC spokeswoman said that Wade's claims "are without merit". The company has not shipped the type of systems mentioned in Wade's lawsuit for two years.
The Register report says that EMC sells a lot of Symmetrix systems, making a serious flaw hard to hide, and that one would expect numerous reports of system failures from customers.
Adware-infected PCs money spinner
Adware infections net the purveyors of slimeware software around US$3 a year for each infected PC, according to estimates from anti-spyware firm Webroot Software. Using this figure and stats from its own malware auditing services, Webroot guesstimates the illicit advertising market underpinned by adware infection of home and business PCs could be worth up to US$1.6bn a year, reports The Register in the UK (2 Feb.).
The Register says that according to Webroot, the illicit ad market enjoys approximately the same growth rate as the legitimate market. But that's where the similarities end.
The public says that it's hard to square Webroot's US$1.6bn estimate with the observable size of adware market. The company looks to be on much firmer ground in working out how much adware agent makes its owner, because its assumptions derive from the public disclosure of firms operating in the market.
Webroot's spy audit suggests an average PC on the net has at "least two pieces of adware on it". ClickZ Stats indicate that there are 280 million active PCs on the internet, and The Register says that by multiplying the number of PCs by the average number of adware items on each by the revenue per app figure allows a guesstimate that the illicit advertising market is worth US$1.6bn a year.
CIOs survey: IBM, Dell gaining market share
IBM and Dell are poised to gain market share in 2005, while Sun Microsystems' outlook remains cloudy, according to a Merrill Lynch survey of 100 chief information officers just released and reported by The New York Times/Reuters (1 Feb.).
The survey also projected that Cisco Systems, Microsoft, SAP and EMC are likely to win more business in 2005, reports the NYT.
Overall, information technology budgets were forecast to grow 5 percent in 2005, compared with 4 percent growth in 2004, Merrill said, and reportedly customers are shifting spending on software and servers to IBM, although IBM's recent sale of its PC business to China's Lenovo Group is seen as hurting its other businesses.
The paper says the survey revealed that about 60 percent of the CIOs said IBM made a bad decision to sell its PC business to Lenovo, with only 28 percent saying it was a good bet. Roughly 45 percent of respondents said the sale would cause them to consider switching vendors, and if they did switch, their purchases of other IBM products might also be reduced.
IBM PC officials said they have been fighting the impression among corporate customers that IBM is exiting the PC business. While hardware production and design will shift to Lenovo, IBM will retain control of sales, support and services. IBM also keeps a nearly 20 percent stake in the merged Lenovo.
CIOs expect Dell to gain share at the fastest rate, according to the survey, and many users would like to see Dell offer servers running Advanced Micro Devices Opteron processor. But interest in Dell printers is tepid, according to the survey.
Computer server and storage equipment maker Sun Microsystems outlook remains cloudy, with only 4 percent of the CIOs surveyed expecting Sun to increase its share of their spending in 2005. However, the NYT says that Sun is telling investors that a turnaround is close. The company, hit harder by the technology recession than its rivals, said it is moving out of stabilisation mode with its strongest product lineup ever.
The paper reports that software and storage are at the top of companies' technology wish lists in 2005, with services and computers lower priorities. Software has grown in importance as companies try to get more out of existing systems, using business intelligence, security and application integration software.
Storage is still important as CIOs contend with new regulatory rules which require companies to preserve more e-mails and phone conversations, says thew papewr, and personal computers, which had been in the middle of spending growth agendas, fell to the bottom. This is of particular concern to PC makers, as consumer spending on PCs is also expected to drop.
Demand for services has weakened as many large companies have outsourced their operations, reported the NYT.
New PC range from Dell
Dell has just unveiled a range of business computers, with some that meet stringent new environmental regulations and others that take steps to prevent network intrusions and theft of intellectual property.
The New York Times/Reuters report (1 Feb) that Dell unveiled a range of models and services, including desktop PCs that will help Dell meet tough European Union regulations set for 2006 that require reducing lead and other toxic materials in PCs.
In addition, Dell is offering new security ``locking'' features on notebooks that take advantage of an industry push by Intel, IBM and other PC makers. Computer files can thus be linked to specific machines to prevent network intrusions or theft of intellectual property.
The paper reports that a PC industry analyst at market research firm IDC said other major PC makers are already on board, but Dell, as the market leader, will make the computer security technology a market reality.
Dell's new products are aimed at corporate buyers who are looking for machines that they can deploy across their organisations, reported the NYT, and while many of these technologies were available to early adopters more than a year ago, Dell promises them at lower prices overall than niche PC makers.
According to the NYT, the desktops also take advantage of a redesign by Intel of internal computer chassis, which in turn allow PC makers like Dell to radically redesign the size and shape of PCs. Intel's latest BTX chassis allows Dell PCs to run cooler, with less noise and in smaller boxes than prior Intel technology.
