Weekly Digest
Weekly Digest Issue No. 538
22-10-2010
by Deirdre McArdle
Microsoft breaches the cloud, hits turbulence | Smartphones play key role in mobile makers' results
Ireland makes progress in world broadband ranks
Ireland took a baby step up the international broadband league this week with the release of a report from the Said Business School, Oxford University, showing we moved up one place from 2009. Ireland now stands 13th in an international ranking of broadband services, ahead of the UK and the US, with Korea in the top position. The report, which was commissioned by Cisco, examined broadband services in 72 countries. So-called Broadband Leaders have a high broadband quality score, which is based on download and upload speeds as well as latency, combined with high broadband penetration.
It's worth noting that Ireland's skip up the rankings is predominantly down to the increase in broadband penetration, which now stands at a respectable 88 percent, up from 77 percent in the same survey in 2009. Broadband speeds have also increased to an average of 4.61Mbps, up 35 percent on last year's average speeds of 3.4Mbps, while latency improved marginally to an average of 97 milliseconds, compared to 100 milliseconds in 2009.
Despite the improvement though, Ireland does not feature in the elite group of 14 countries considered 'ready for tomorrow's applications', such as high-definition internet TV and high-quality video communications. Those 14 countries include Korea, Japan, Latvia, Sweden and Bulgaria. A second batch of 19 countries are branded 'comfortably enjoying today's applications'. They include the US, France, and the UK. Meanwhile, Ireland sits in the 'meeting the needs of today's applications' group, which also includes Taiwan, Italy and Turkey. The report recommends that governments and stakeholders set "ambitious goals" for the availability, quality and penetration of high-speed broadband. It also advises service providers to build their broadband business model based on quality as a differentiator.
Apple enjoys record-crunching results
Apple enjoyed a remarkable set of quarterly results this week, building on the ongoing momentum of the immensely popular iPhone. Profit for its fourth fiscal quarter came in at USD4.31 billion, up an impressive 70 percent from the USD2.53 billion in the same period last year. Revenue was a record-breaking USD20.34 billion, 67 percent higher than last year's tally, while earnings per share were USD4.64, significantly ahead of analysts' estimates of USD3.44 per share on revenue of USD18 billion.
Apple sold 14.1 million iPhones in the quarter, representing 91 percent unit growth over the year-ago quarter, and ahead of the 11 million analysts were expecting. The iPhone has become increasingly important to Apple and according to reports it now represents 43 percent of the company's overall sales. During the quarter, Apple also shifted 4.19 million iPads, and Mac sales increased by 27 percent to 3.89 million. Looking ahead to the firm's fiscal first quarter of 2011, Apple said it expects revenue of about USD23 billion and earnings per share of USD4.80. The earnings figure is considerably lower than the consensus expectations of USD5.07 a share, but typical of Apple's extremely conservative estimates.
At the earnings press conference Apple broke the news that it still had "a few surprises left for the remainder of this calendar year". And on Wednesday, a selection of those surprises were revealed. It launched FaceTime, its free video calling service from the iPhone and iPod touch, for Mac computers, and said a version of the App Store would be launched for its home and portable computer lines within three months. During demonstrations at Apple headquarters on Wednesday, Apple CEO Steve Jobs said other aspects familiar to iPhone, iPad and iPod touch owners, such as the ability to flick from one screen to another, would come in summer 2011 with the next version of the Mac OS X operating system.
Modest growth for Yahoo, while Google thrives
Two internet rivals posted contrasting third quarter results this week. First up, Yahoo recorded revenue of USD1.6 billion, up just 1.7 percent from the year-ago quarter, and at the lower end of its July projections of between USD1.57 billion and USD1.65 billion. Furthermore, excluding commissions paid to partners, Yahoo's revenue actually fell 0.6 percent in the quarter to USD1.12 billion. The search firm posted profit of USD396 million, or USD0.29 a share, up from USD186 million, or USD0.13 a share, a year ago. However, Yahoo said the latest period included a USD0.13-a-share benefit from the sale of its HotJobs business. On a positive note, Yahoo said sales of display ads on its websites, including banner, interactive and video ads, increased by 17 percent, driven primarily by growth in Asia.
Yahoo CEO Carol Bartz is coming under increasing pressure from investors to turn things around at the search firm, which has been struggling to compete against the might of Google for a while now. During a results conference call Bartz told journalists: "Once we get search stabilised from a revenue standpoint and start going positive… we've got an entirely different company here." She referred to the partnership with Microsoft, and said now that advertisers have started buying ads on Yahoo through Microsoft's ad platform, advertising revenue would improve. In the call, Bartz refused to be drawn on the rumours that Yahoo was the target of a group of private equity investors, or that a merger with AOL was on the cards.
Separately, Yahoo's chief rival Google produced a more solid set of quarterly figures. The internet giant posted a 32 percent rise in profit and a 23 percent hike in revenue, on the back of strong search-ad sales. The company recorded third-quarter profit of USD2.17 billion, or USD6.72 a share, up from USD1.64 billion, or USD5.13 a share, a year earlier. Revenue was USD7.29 billion, up from USD5.95 billion a year ago. The results show how Google is benefiting from a broad recovery in online ad spending this year. Paid clicks rose 16 percent in the quarter compared with a year earlier, and the average price that marketers paid Google per click increased 3 percent from a year earlier.
Microsoft breaches the cloud, hits turbulence
Meanwhile, Google may feel a little threatened by Microsoft's launch this week of Office 365, which puts the software giant's key applications online. Available for a monthly subscription fee, Office 365 will give users online access to Microsoft Office, SharePoint Online, Exchange Online and the Lync Online instant-messaging software. Prices for Office 365 start at USD6 per user, per month for small businesses. The service, which will launch in 2011, will replace Microsoft's Business Productivity Online Suite, and will compete with the likes of Google Apps.
Just a day before announcing Office 365, CEO Steve Ballmer told employees that Ray Ozzie, Microsoft's chief software architect and main technical visionary following Bill Gates' retirement, was to leave the firm. Ozzie was a key advocate of cloud computing within Microsoft, and under his guidance the software giant released various products including Live Mesh and Windows Azure. According to the Wall Street Journal, Ballmer said that the role of chief software architect was "unique" and would not be filled following Ozzie's departure.
The departure of Ozzie marks an unstable time for Microsoft, which has seen a number of key executives leave the company in recent weeks. Earlier this month, Gary Flake, the leader of Microsoft's Live Labs research team, resigned after five years at the company, while September saw the departure of Stephen Elop, head of Microsoft's business division, who left to take the top role at mobile maker Nokia.
Smartphones play key role in mobile makers' results
Indeed, Elop was in action on Thursday, presiding over his first earnings release for Nokia. The Finnish mobile giant saw revenues rise 4.7 percent to EUR10.27 billion, while it returned to a EUR529 million profit, from a EUR559 million loss a year earlier. Earnings per share dropped to USD0.14, compared to USD0.17 a year ago; however, the figure beat analysts' consensus estimate of between USD0.08 and USD0.12 per share. Elop also announced that the firm would be cutting 1,800 jobs as it tries to streamline its Symbian smartphone business and its services unit.
Meanwhile, Sony Ericsson posted a modest profit of EUR49 million in the third quarter, reversing a year-ago loss of EUR164 million. Although revenues fell slightly to EUR1.6 billion from EUR1.62 billion, CEO Bert Nordberg said he was pleased with the figures, and said the company's performance was stabilising. "Our strategy to focus on the smartphone segment is succeeding and smartphones now comprise more than 50 percent of our total sales," he said. Nordberg revealed the firm's ambition to become the top mobile maker on the Android platform.
Results from the mobile sector reveal that the market is being driven primarily by massive growth in the smartphone segment. During the third quarter 77 million smartphones were shipped globally, representing growth of 78 percent year-on-year, according to Strategy Analytics. Smartphones accounted for nearly a quarter (23 percent) of total worldwide handset volumes during the quarter, up from 20 percent in the prior quarter. Nokia shipped a record 26.5 million smartphones worldwide, up 61 percent from 16.4 million units a year earlier. Apple leapfrogged over BlackBerry maker RIM, shipping 14.1 million iPhones, nearly double the 7.4 million it sold in the year-ago quarter. Third-placed RIM shipped 12.4 million units during the quarter, up from 8.5 million a year ago.
Caped Koala Studios has built a virtual world for kids, combining education and social networking 