Tech earnings this week highlighted the importance of mobile communications to IT, as companies including Apple, Samsung, Facebook, AT&T and Texas Instruments reported mixed results for the quarter ending in June.
Apple and Samsung earnings underscored competition in the mobile market. Reporting Tuesday, Apple said revenue was up 1 percent year over year to $35.3 billion, while profit declined 22 percent to $6.9 billion.
The lack of a new hit product, competition from Android-based devices and sagging sales overseas, particularly in China, hampered earnings for the quarter. Apple sales in China declined 4 percent year over year. The overseas results indicated a problem other IT companies face.
“The continued recession in Europe and slowing growth in China will offset improvements in the US, Japan, and some emerging markets,” according to Forrester analyst Andrew Bartels, in a recent forecast for IT sales this year.
While Apple had a soft quarter, however, a refresh of its mobile product lines should bolster growth, analysts said. “We maintain our belief that Apple has a strong product pipeline, including a refreshed iPhone 5S, mid-tier iPhone, and iPad lineup that should result in solid earnings growth,” wrote Canaccord Genuity analyst T. Michael Walkley in a research note. The launch of a lower-cost iPhone should also help Apple in emerging markets, Walkley noted.
Meanwhile, Samsung Electronics, reporting Friday, said that even though revenue and net earnings rose significantly year over year, tough competition in the mobile phone market and the need to boost marketing costs cut into results.
The company generated a profit of 7.77 trillion won (US$6.89 billion), up a whopping 50 percent year over year, as sales rose 21 percent to 57.5 trillion won. However, marketing costs associated with, among other things, launching its Galaxy S4 during the quarter brought operating profit down for the mobile unit by 3 percent even though sales increased.
Samsung has been edging out Apple in the hard-fought mobile phone market. A report from Strategy Analytics on Friday said that Apple’s share of the smartphone market declined in the second quarter to its lowest level in three years, slipping to 13.6 percent in the quarter from 16.6 percent year over year. During the same period Samsung’s market share rose to 33 percent from 31 percent.
However, Apple and Samsung face a similar problem: Their success in high-end smartphones means that mature markets are saturated. They face the tough task of getting users in developed markets to upgrade while coming up with devices tailored to emerging markets, some of which face slowing growth over the next few quarters.
The shift to mobile computing has implications for a wide variety of IT and Internet companies. Facebook on Wednesday said mobile ad sales helped fuel revenue, which skyrocketed 53 percent year over year to $1.81 billion, while profit totaled $333 million compared to a net loss of $157 million.
A year ago, the social networking giant had essentially no mobile revenue, but during the past quarter sales of mobile ads came out to 41 percent of total advertising revenue for the quarter.
Mobile communications also played an important part in AT&T’s quarter. The company reported a rise in revenue as strength in its mobile business made up for flat-lining wireline sales.
The company Tuesday said it gained 632,000 wireless subscribers in the quarter, while mobile data sales increased almost 20 percent year over year. Total revenue increased 1.6 percent year over year to $32.1 billion. Excluding AT&T’s former Advertising Solutions division, which was sold off, sales were up 2.6 percent. However, as operating expenses rose, profit declined to $3.82 billion, down from $3.9 billion.
Other tech companies reporting earnings this week included:
- Texas Instruments: The chipmaker, noting weakness in the PC market, said revenue declined by 9 percent year over year to $3.1 billion. Net income, however, rose by 48 percent to $660 million as cost-cutting measures took effect.
- Amazon: The retailer reported that sales for the quarter rose 22 percent year over year to 15.7 billion. Operating income, however, declined 26 percent to $79 million. The good news was that its business in the U.S., which is expected to expand faster than overseas markets, increased and earnings in the region were up.