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Microsoft, the world’s largest software maker, rose as much as 5.9 percent after predicting that it can shave an extra $700 million from operating expenses this year. Amazon.com’s sales increased 18 percent as more customers took advantage of free- shipping promotions.
“A lot of the big negative surprises are behind us,” said David Rudow, an analyst with Thrivent Asset Management in Minneapolis. The company oversees about $65 billion, including Microsoft shares. “We’ve seen the worst. It’s just a question of when we see return to growth and normal spending again.”
The Standard & Poor’s 500 Information Technology Index has advanced 13 percent this year, compared with a 5.7 percent loss for the S&P 500 Index. Apple Inc., EBay Inc. and AT&T Inc. reported earnings this week that topped analysts’ estimates, a sign that spending on everything from iPhones to e-commerce held up in the worst recession since World War II.
Microsoft, based in Redmond, Washington, rose as high as $20.03 in extended trading yesterday. Seattle-based Amazon.com, whose shares have doubled since December, advanced as much as 3.2 percent to $83.20.
Travel Reductions
At Microsoft, cost savings helped overcome the first revenue decline since the company went public in 1986. Sales fell 5.6 percent to $13.6 billion in the third quarter, which ended March 31. Profit declined 32 percent to $2.98 billion. Excluding some costs, earnings were 39 cents, matching the estimate of analysts in a Bloomberg survey.
Job cuts, travel reductions, marketing cutbacks and a slower expansion of Microsoft’s campus helped Chief Executive Officer Steve Ballmer save more money than expected. For the year ending in June, Microsoft forecast expenses of as little as $26.7 billion, compared with a previous estimate of $27.4 billion.
“Microsoft hasn’t really had to show all that much expense control during its entire lifetime as a company, so it’s good to see that when things turn bad, they can bring down their costs accordingly,” said Kimberly Caughey, senior equity analyst at Pittsburgh’s Fort Pitt Capital Group Inc., which owns the shares.
Microsoft reaffirmed plans to eliminate as many as 5,000 jobs by the middle of 2010, with the goal of saving $1.5 billion annually in operating expenses.
‘Actually Pleased’
“While I can’t say I’m happy with any quarter where our revenue and earnings per share decrease, I was actually pleased with our relative performance,” Microsoft Chief Financial Officer Chris Liddell said on a conference call with analysts yesterday.
At Amazon.com, the world’s biggest Internet retailer, profit jumped 24 percent to $177 million, or 41 cents a share, topping analysts estimates. Sales rose 18 percent to $4.89 billion.
Amazon.com was able to improve profitability by saving money on shipping and doing a better job managing inventory, Chief Financial Officer Tom Szkutak said on a conference call. Gross margin, or gross profit as a percentage of sales, expanded to 23.5 percent from 23.1 percent a year earlier.
Rival EBay reported sales and profit this week that also beat estimates. CEO John Donahoe said consumer spending showed signs of strengthening in the second half of the quarter.
IBM, EMC
While there may be signs of improvement, not all technology companies are skirting the recession. International Business Machines Corp., the world’s biggest seller of technology services, reported first-quarter revenue this week that missed analysts’ estimates after demand for services and computer hardware shrank. EMC Corp., the world’s biggest maker of storage computers, posted a 20 percent drop in first-quarter profit yesterday because companies curbed spending on its machines.
VMware Inc., the biggest maker of programs that let servers run multiple operating systems at once, predicted this week that sales may fall for the first time in its history.
Goldman Sachs Group Inc. estimates that global technology spending will fall 9 percent this year. Purchases in developed economies, including the U.S. and Europe, will drop 12 percent.
Still, technology companies have fared better than other businesses this year because they aren’t as dependent on short- term financing, said Michael Cuggino, chief executive officer of San Francisco-based Pacific Heights Asset Management LLC.
“Overall technology held up pretty well,” he said. “I expect to see it continue.”
BY Dina Bass and Joseph Galante
Source：Bloomberg
To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net; Joseph Galante in San Francisco at jgalante3@bloomberg.net
© 2009 BLOOMBERG L.P. ALL RIGHTS RESERVED.
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