Microsoft Dips, Apple Soars and Avnet Sails On

By TC Doyle Comments
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Financial results for the quarter ending in March from several tech titans reveal the information and communication technology (ICT) industry to be in a state of flux, with customers spending deeply in all things cloud and security-related, while pulling back investments in traditional PCs.

On Thursday, Microsoft, the world’s largest software company, posted results that failed to inspire investors and analysts. For the quarter – the first under new CEO Satya Nadella – Microsoft posted earnings of $5.66 billion on sales of $20.4 billion. Profit was down 6.5 percent from a year ago, while sales were off 0.4 percent.

On a positive note, sales of business software and cloud technologies, the company said, are zooming. According to Microsoft, sales of Lync, SharePoint and Exchange collectively grew by “double digits." Commercial cloud revenue, meanwhile, grew 103 percent.

So what’s dragging on the Redmond, Wash.-based company? Windows and Office. These franchises remained challenged due to tepid demand for traditional PCs.

While the results from Microsoft were a bit of a disappointment, Apple, by contrast, surprised Wall Street with a strong quarter.

On Wednesday, Apple reported its results for the period ending in March, the company’s second fiscal 2014 quarter. Sales jumped 4.7 percent to $45.6 billion, beating analysts expectation by more than $2 billion. Earnings, meanwhile, totaled $10.2 billion, up 7 percent from one year ago.

The results surprised many Apple watchers. Many were caught off guard by the surprising 17 percent jump in sales of iPhones, which were helped by recent expansion into China. During the period, Apple sold 43.7 million iPhones worldwide in the second quarter, more than 5 million units more than what company watchers expected. Also a surprise: Apple’s gross margins. They improved to 39.3 percent compared to 37.5 percent in the year-ago quarter.

Apple’s only dim moment came when the company said that sales of the iPad slipped by a startling 17 percent. In a conference call after releasing its financial results, Apple suggested that some of the sales dip was as a result of some inventory rebalancing. In addition, company executives noted that 91 percent of new activations of tablets in enterprise accounts were iPads. iPads are now used 98 percent of the Fortune 500, attracting greater application support and commitment than ever before.

Speaking of the enterprise, Avnet Inc. also reported results this week. For the quarter, sales rose 6.1 percent to $6.7 billion. Avent’s Technology Solutions operating group, which distributes high-end, hardware, software and services to solution providers, reported a sales increase of 2 percent year-over-year to $2.6 billion. Sales in the Americas and EMEA region were somewhat disappointing and dragged down the company’s overall profitability. According to Avnet, “operating income dollars and margins at the global level declined by 11.3 percent and 35 basis points year-over-year, respectively."

While Avnet Technology Solutions saw strong year-over-year growth in networking, security and services, revenue from the sale of traditional server technologies suffered.

Finally, this week, retail and technology giant Amazon reported financial results. For the quarter, the company reported a modest net income of $108 million, compared with $82 million achieved a year earlier. Sales, meanwhile, jumped by 23 percent to $19.74 billion, beating most analysts’ expectations.

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