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Palm, RIM and the Red Hot Smartphone market

Posted on Friday, Nov 2nd 2007

Both Palm and RIM released their earnings in early October. Here is a look on their results and latest developments since my last set of posts on these companies.

Palm (Nasdaq:PALM) reported total revenue of $360.8 million in the first quarter of fiscal year 2008, up 1% y-o-y. Net loss was $0.8 million, or $0.01 per diluted share compared to net income for Q1 2007 of $16.5 million, or $0.16 per diluted share. Gross margin decreased to 36.3% compared with 37.1% in the year-ago period and 38.3% sequentially.

Smartphone sell-through was 689,000 units, up 21% y-o-y. Revenue from smartphones was $302.2 million, a y-o-y increase of 12% which was offset by 33% decline in the handheld business. For the quarter, revenue mix was 84% Smartphones and 16% handhelds.

In September, it launched Palm Treo 500v with Vodafone and the Palm Centro with Sprint. The Centro, which offers enhanced web and media applications and support for 3G for just $99 has got rave reviews. Based on the Palm OS, it could be a step in the right direction to meet its turnaround challenges as discussed at length in my recently concluded interview with departing Chairman Eric Benhamou. >>>

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SAP Aggressively Going After SaaS, SME, Business Users

Posted on Thursday, Nov 1st 2007

SAP (NYSE:SAP) reported its earnings on October 18 for the third quarter of fiscal 2007. Its revenues were €2.42 billion up 9% y-o-y. Net income was €408 million, a y-o-y increase of 10% over €370 million last year. EPS was €0.34, up 13% from €0.30 in Q3 2006. Software and software related service revenues were €1.74 billion, an increase of 13% over €1.54 billion in Q3 2006. Pure Software revenues were €715 million, up 11% y-o-y.

As per the earnings call, SAP has reiterated that its growth strategy is to continue to grow faster than the market by expanding its addressable market. It expects stable growth from its traditional businesses of horizontal and vertical applications, and accelerated growth from the SME and business user segments of the business process platform. The Business Users, by the way, is an untapped base that SAP really wants to penetrate, to raise its adoption and usage in the enterprise customers. >>>

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Oracle Will NOT Play in SaaS, But Will Continue Gobbling

Posted on Wednesday, Oct 31st 2007

Oracle (NASDAQ: ORCL) reported its earnings for Q1 2008 in September. Revenue was $4.5 billion, a y-o-y increase of 26%. Its EPS was $0.16, up 28% over Q1 2007. Net income was $840 million, an increase of 25%.

Software revenues increased 26% over last year to $3.5 billion with new software license revenues increasing 35% to $1.1 billion. Database and middleware new license revenues saw a y-o-y growth of 23% and applications new license revenues increased 65%. Services revenues increased 25% to $1.1 billion over the first quarter of fiscal 2007.

As I mentioned in an earlier post on Oracle, its on-demand offering is miniscule and it looks like it will remain that way. In the earnings call, Larry Ellison has said that SAAS involves a high cost of sales and cost of implementation. It would not be following SAP in luring the SME SAAS market as it would need to spend on new product development and sales teams. It would rather wait to see how SAP makes money out of it. Interesting conclusion coming from Larry, given that he is a seed investor in both Salesforce.com (Nasdaq: CRM) and NetSuite (about to go public). >>>

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Can Paychex Become a SaaS Aggregator?

Posted on Friday, Oct 26th 2007

I had written about Paychex more than two years back when I started this blog in a post called Microsoft’s Two Should-Be Acquisition Candidates. Since then Paychex has grown steadily, and market cap has appreciated from $12.3 Billion to $15.62 Billion. I will look at it in more detail in this post.

Paychex (NASDAQ:PAYX) is a leading provider of payroll and benefits outsourcing solutions in the SME market with annual revenue of $1.9 billion and net income of $514 million in fiscal 2007. Its biggest rival is ADP which I will cover soon. Based in New York, the company has more than 100 offices with 11,700 employees and 561,000 payroll clients. Paychex takes care of a vital but simple business process for its clients, and has thus positioned itself as an essential piece of the workflow at numerous companies. >>>

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Intuit Bets on SaaS, Not Yet on International

Posted on Thursday, Oct 25th 2007

In some of my earlier posts, I have talked about how Intuit has successfully penetrated SME with its killer app of small business accounting software. You have also been reading my interview with Jim Heeger, who has discussed Intuit’s historical strategy in a fair bit of detail. In this post, I will look at Intuit’s current financials and strategy in more detail.

Intuit (Nasdaq: INTU) is the leading provider of accounting and tax solutions in the SME space with a lion’s share of the market, revenue of $2.67 billion, market cap of $10.62 billion, and 8,200 employees in fiscal 2007. Founded in 1983 and based in California, its business is organized into six segments: QuickBooks, Payroll and Payments, Consumer Tax, Professional Tax, Financial Institutions and Other Businesses. >>>

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Dell Needs a Convergence Device Strategy Badly

Posted on Wednesday, Oct 17th 2007

According to a recent Forrester report, 1 billion PCs will be in use by 2008 and 2 billion PCs by 2015. A beneficiary of this market is Dell, which is the No.2 vendor in the PC market with a 16.1% market share (IDC, Q2 2007). However, a majority of the next billion PCs will likely be convergence devices and as I have said before, Dell needs to come up with a convergence device strategy to be a true beneficiary. As it stands, I haven’t seen one yet.

Dell (NasdaqGS:DELL), for long, had been a darling of Wall Street, but fell out of favor as its direct selling model became commodity. Its business is organized in the geographic segments, Americas; Europe, Middle East and Africa (EMEA), and Asia Pacific-Japan (APJ). Its products and services are organized under its core products of Desktop PCs, Mobility, Software & Peripherals, Servers & Networking, Enhanced Services, and Storage. It is the No. 4 vendor in the total disk storage systems market with 9.8% share and in the server systems market with 11.6%.

Earlier in January, Michael Dell, the founder of the company, returned as CEO replacing Kevin Rollins, under whose stewardship, the company has floundered. >>>

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IBM’s Business Remixing

Posted on Tuesday, Oct 16th 2007

IBM announces earnings later today. I have written several pieces on IBM’s various activities, which can be found here, here, and here. In this post, I will look at IBM as a whole, and how their attempt to increase margins by increasing the software portion of the portfolio has been faring.

International Business Machines Corporation (NYSE: IBM) is one of the world’s largest IT company with revenues of $91.4 billion, in 2006. Based in New York, it operates in 170 countries with about 30% of its employees now in the Asia Pacific, as a result of worldwide restructuring. As per IDC, IBM is the leading services vendor with $49.3 billion in services revenue in 2006. It is also the leader in the worldwide server systems market with 31% market share. In the total worldwide disk storage systems market, it has 19.3% market share, close on the heels of HP with 20.6% market share. It is also a leader in the worldwide software configuration management market. >>>

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HP’s Stunning Turnaround

Posted on Monday, Oct 15th 2007

As per a recent Forrester report, 1 billion PCs will be in use by the end of 2008 and 2 billion by 2015. With the increasing trend toward convergence devices, a majority of the next billion PCs will be convergence devices.

In this post, I will look at HP, a company that has not only engineered an incredible turnaround under the no-nonsense leadership of CEO Mark Hurd, but has managed to show growth and sustainability in markets that competitors like IBM have exited under pressure from China. >>>

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Online Video Beneficiaries: Seagate

Posted on Tuesday, Oct 9th 2007

There has been an explosive growth in digital content in the home and the office – from high-definition video, music, blogs and podcasts, to CAD and other large graphics files, and archived emails. The growing online video trend and the increasing popularity of YouTube and the likes is a major driving force for the increasing demand for massive amounts of hard drive storage. All the videos that get downloaded or uploaded need to get stored somewhere, right? In this post, I will analyze Seagate as an online video beneficiary.

Seagate Technology (NYSE: STX) is a leader in the design, manufacturing and marketing of rigid disc drives. Based in California, it has 54,000 employees, of which 43,000 employees are located in its Asian operations. It has around 3,857 U.S. patents and 761 foreign patents. Seagate acquired Maxtor in May 2006 and EVault in January 2007. The disc drive industry is undergoing consolidation with TDK acquiring Alps and Western Digital acquiring Komag in 2007. >>>

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Online Video Beneficiaries: F5

Posted on Wednesday, Oct 3rd 2007

The Online Video momentum is driving growth and activities in the networking equipment and infrastructure industry. 3Com just reaped the benefits in form of a Private Equity transaction. Akamai is another strong beneficiary.

This post will look at the topic from the application delivery networking angle. There is an increasing use of web-based business applications and use of PDAs, smartphones, and notebook computers to access multimedia applications over the Internet. A major beneficiary of this trend is F5. >>>

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