Samsung Report on Earnings Reveals Challenges Ahead

TOKYO — No wonder Samsung Electronics is so busy looking for a new hit product. Its signature device, the high-end smartphone, seems to be facing unanticipated challenges.

Samsung, the world’s largest maker of smartphones, said on Tuesday that its operating profit in the fourth quarter had declined from the previous quarter, and also when compared with the fourth quarter of 2012.

As usual, the company, based in Suwon, South Korea, released only a bare-bones forecast in advance of a full quarterly earnings report later this month. It provided no reasons for the expected decline. But analysts said softness in smartphones, which account for more than half of Samsung’s earnings, was probably a big reason.

“One by one, players in the premium price band have been squeezed out, and now it looks like Samsung may be squeezed out as well,” said Thomas Kang, an analyst at Counterpoint Technology Market Research.

Samsung still has about a third of global smartphone sales, but there are multiple challenges to its dominance. At the low end, several Chinese companies are offering phones with similar features at a lower price. But more worrying for investors are new signs of vulnerability in premium-price phones, which account for the vast majority of the profit in the business.

For several years, Samsung and Apple have been battling for leadership in high-end phones. Now Apple is making new gains. In November, it sold 65 percent of the smartphones priced at $400 or more worldwide, up from 35 percent a year earlier, according to Counterpoint. And that was before Apple added China Mobile, the world’s largest network operator, as an iPhone partner, with sales set to begin this month.

In the same period, Samsung’s share of the premium market fell to 21 percent from 40 percent, according to Counterpoint.

A year ago, Samsung had two strong entrants in the high-end category, the Galaxy S3 smartphone and the Note 2, a so-called phablet, or cross between a phone and a tablet computer. But the current flagship smartphone, the Galaxy S4, has been a relative disappointment, leaving a new phablet, the Note 3, to carry the load.

Faced with sluggish sales, Samsung resorted to price cuts in the fourth quarter in an effort to clear inventories, analysts said. The average selling price of the company’s smartphones was $290, down from $320 a year earlier, according to analysts at Sanford C. Bernstein.

Bernstein estimated that overall sales of Samsung handsets, including smartphones and old-fashioned feature phones, slipped to 119 million in the fourth quarter from 120 million in the third quarter. Normally, the fourth quarter is a strong period because of holiday sales.

Samsung is expected to introduce a new flagship phone to succeed the Galaxy S4 this winter. It is experimenting with new kinds of handsets, including ones with curved screens, and the company is doing research on devices with flexible displays.

Last fall, the company introduced a so-called smartwatch called the Galaxy Gear, which works as a companion to certain smartphones. At the Consumer Electronics Show in Las Vegas this week, Samsung has introduced or shown off a flurry of new products, including high-end home appliances, tablet computers and televisions. One of the new TVs features a screen that can be flat or curved, according to the viewer’s preference; another has a giant 105-inch, ultra-high-definition display.

But smartphones are Samsung’s cash cow, and the new challenges in that business have raised concerns among some investors. The forecast Tuesday was below most analysts’ estimates.

The company predicted operating income of about 8.3 trillion won ($7.8 billion) for the final three months of the year, down from 10.2 trillion won in the third quarter and 8.84 trillion won in the fourth quarter of 2012. Revenue is expected to total about 59 trillion won, roughly even with the third quarter.

The company’s shares have fallen nearly 15 percent in the last year, and nearly 9 percent in the last month. On Tuesday, the shares fell 0.2 percent, to 1.3 million won, or $1,220.

Analysts say Samsung’s earnings were reduced by a special bonus to employees to celebrate the 20th anniversary of what the company calls its new management initiative. In 1993, the Samsung group patriarch, Lee Kun-hee, began a drive to raise the quality of the company’s products, telling managers to “change everything except your wife and children.”

Byun Han-joon, an analyst at KB Investment and Securities, estimated that the special bonus cost Samsung 800 billion won. Other analysts said the recent strength of the South Korean currency might have lowered earnings by reducing the amount of won received for exports.

“I don’t think that today’s results show any fundamental problem in Samsung Electronics,” Mr. Byun said. But he added that the new forecast raised the possibility of a faster-than-expected swing from high-end to lower-priced smartphones, which would continue to put pressure on the company’s earnings in future quarters, unless Samsung comes up with some new, must-have products.

“This now gets worth thinking about in depth,” Mr. Byun said.

Samsung Forecasts Greater Earnings Decline Than Expected for the End of 2013

TOKYO — Samsung Electronics, the world’s biggest maker of smartphones, said Tuesday that its earnings in the last quarter of 2013 fell from the previous three-month period as well as from the same period a year ago, heightening investors’ concerns about competitive pressures in the industry.

As usual, the company, based in South Korea, released only a bare-bones forecast of its quarterly earnings, in advance of a full report later in the month, and provided no reasons for the expected decline in operating income. Analysts have said the company faced tighter profit margins on smartphones, along with higher employee bonus costs, during the quarter.

While the drop was expected, the earnings forecast was below analysts’ estimates. The company predicted operating income of about 8.3 trillion won ($7.8 billion) for the final three months of the year, down from 10.2 trillion won in the third quarter. In the fourth quarter of 2012, the company had  8.84 trillion won in operating income.

Revenue is expected to total about 59 trillion won, roughly even with the third quarter.

While Samsung controls more than one-third of the global smartphone market, it faces renewed competition from Apple, which recently added leading network operators like China Mobile and NTT DoCoMo of Japan to its roster of iPhone vendors.

Samsung also faces increased competition from low-cost manufacturers in China, some of which hope to challenge Samsung and Apple in developed markets.

Analysts say Samsung’s costs in the fourth quarter were lifted by a special bonus to some employees to mark the 20th anniversary of what the company calls its new management initiative. In 1993, the Samsung group patriarch, Lee Kun-hee, began a drive to raise the quality of the company’s products, telling managers to “change everything except your wife and children.”

Samsung will issue a detailed earnings report on Jan. 24.

No wonder Samsung Electronics is so busy looking for a new hit gadget. Its signature product, the smartphone, is facing unanticipated challenges.

Samsung, the world’s largest maker of smartphones, said Tuesday that its operating profit in the fourth quarter had declined from the third quarter of  2013, and also compared with the fourth  quarter of 2012. 

As usual, the company, based in  Suwon, South Korea, released only a bare-bones forecast in advance of a full quarterly earnings report later in the month. It provided no reasons for the expected decline. But analysts said softness in smartphones, which account for more than half of Samsung’s earnings, was probably a big reason.

Samsung still has a roughly one-third share of global smartphone sales, but it faces new challenges to its dominance. At the low end, a number of Chinese companies are offering phones with similar features at a lower price. More worrying for investors are new signs of vulnerability in premium-price phones, which account for the vast majority of the profit in the business. 

For several years, Samsung and Apple have been battling for leadership in high-end phones. Now Apple is making new gains. In November, it sold 65 percent of the smartphones priced at $400 or more worldwide, up from 35 percent a year earlier, according to Counterpoint Technology Market Research.  And that was before Apple added China  Mobile, the world’s largest network operator, as an iPhone partner, with sales set to begin this month.

In the same period, Samsung’s share of the premium market fell to 21 percent from 40 percent, according to Counterpoint.

‘‘One by one, players in the premium  price band have been squeezed out, and now it looks like Samsung may be  squeezed out as well,’’ said Tom Kang, an analyst at Counterpoint.

A year ago, Samsung had two strong entrants in this category, the Galaxy S3  smartphone and the Note 2, a so-called  phablet, or cross between a phone and a  tablet computer. But the current flagship smartphone, the Galaxy S4, has been a relative disappointment, leaving a new phablet, the Note 3, to carry the load.

Hewlett-Packard Earnings Top Expectations, but Revenue Falls

But while H.P. outperformed the diminished expectations Wall Street had for the quarter, revenue was lower in five of its six business segments, and demand for key products like personal computers collapsed.

In an interview, Ms. Whitman said that she had built up H.P.’s cash position and lowered its debt, while retooling businesses and shuffling executives, as part of an overall plan to move one of the world’s largest information technology companies to “a new style of I.T.”

In that world, businesses and consumers will rent software over the Internet, and pay for technology-infused experiences like the ability to print from a mobile phone to a kiosk at a FedEx store, as much as they now buy H.P. mainstays like laptop computers and printers.

“This is a pretty big change,” she said. “We need to do it with speed, and we need to leverage it with scale.” In PCs, H.P.’s biggest business, she said, the company has to cater to “people’s desire to personally compute,” using a variety of devices and technologies.

“We haven’t broken through that,” Ms. Whitman said.

Some of the progress, in things like new kinds of tablet computers that use Google’s Android operating system instead of the Windows software from Microsoft, will be seen over the next few weeks, as H.P. offers a number of machines for the Christmas season. Other efforts, like the kiosk printing, three-dimensional printers, or H.P.’s own so-called cloud computing business, may not show significant revenue for several years.

Analysts appeared content with H.P.’s results, while warning about the difficulties ahead. H.P. reported net income of $1.41 billion, or 73 cents a share, in contrast to a loss of $6.85 billion, or $3.49 a share, in the period a year earlier. Revenue was $29.1 billion, a drop of 3 percent from a year ago.

The net income, excluding charges, was $1.01, above the expectations of Wall Street analysts. They had expected $1 a share and revenue of $27.91 billion, according to a survey of analysts by Thomson Reuters. The news sent H.P. stock up more than 5 percent in after-hours trading.

Nonetheless, revenue from consumer PCs fell 10 percent. Revenue from software, an essential growth area for the company, fell 9 percent from a year earlier (in part related to a large sale H.P. made in 2012, making comparisons with new earnings difficult). Sales of business hardware, the only business segment to rise, were up a modest 2 percent.

H.P. returned cash to shareholders in the form of a dividend payment, but cut research and development spending by $180 million, a big slice from the $909 million spent in that area a year ago.

“They’re very challenged longer term,” said Bill Kreher, an analyst with Edward Jones. “Most people view this as a restructuring, or a turnaround story. It’s going to be so hard for them to get away from their old hardware businesses.”

H.P., one of the oldest companies in Silicon Valley, was blindsided by advances like smartphones, tablets and cloud computing, all of which have hammered its core businesses, as well as turmoil in its executive ranks. Ms. Whitman, who came on board in September 2011, was the company’s third chief executive in just over two years.

“We still have a lot of work to do,” Ms. Whitman said, adding that she would not get H.P. into businesses like smartphones as an alternative to PCs unless she saw a means to success in that business. “It’s hard to figure out how to make money in that,” she said.

Fair Game: Earnings, but Without the Bad Stuff

And managers of companies that have generated only losses, like Twitter — and even those that are profitable — are happy to suggest metrics that they think are better suited for assessing their operations.

Managements’ recommended measures, typically not found in generally accepted accounting principles, have an uncanny way of burnishing a company’s results. They do so by eliminating some pesky costs of doing business.

As such, these benchmarks are also known as earnings without the bad stuff. They were central to the valuations that propelled Internet stocks skyward in the late 1990s. Then, the higher the market climbed, the kookier the metrics became.

My favorite measure was used by analysts to hype the prospects of Homestore.com, a web-based provider of real estate services. They lauded its potential because of the “share of mind” it enjoyed among its customers.

That “share” may have been meaningful in early 2000, as the company’s stock hit $489, but it vanished quickly when Homestore.com crashed in 2001. (Stuart Wolff, a former C.E.O., was sentenced to prison in 2010 after pleading guilty to conspiracy to commit securities fraud.) The company now operates as Move Inc.; its stock closed Friday at $16.09.

What costs do companies want investors to remove from the income statement? Among the most popular are those associated with stock-based compensation, like options and restricted stock. Because these forms of pay aren’t made in cash, the theory goes, they should be backed out of a company’s expenses.

Twitter’s recent prospectus serves as an example. Its management suggests that investors not focus solely on its $134 million net loss for the first nine months of 2013, a figure calculated under generally accepted accounting principles. If you want to see the company’s operating results “through the eyes of management,” the prospectus suggests, look at its “non-GAAP net loss” of $44 million for the period.

To get to that figure, Twitter backs out two large costs. Stock compensation for the first three quarters of 2013 is the biggest, at $79 million. Twitter also removes $11 million in costs associated with amortizing or reducing the value of intangible assets it acquired previously.

There’s nothing improper in Twitter’s filing. But the idea that these items don’t cost the company is nonsense, says Jack T. Ciesielski, an accounting expert at R.G. Associates in Baltimore and publisher of The Analyst’s Accounting Observer.

“When they back out stock-based compensation they’re basically saying that management is working for free,” Mr. Ciesielski said. “And we know that’s not the case.”

Ditto for the intangibles, he said. “When they acquired a company, they spent money for things like in-process research and development, contracts and customer lists,” he added. “To back out those intangibles is bogus.”

Twitter is just one of many companies that point shareholders to rosier earnings measures. And when they do so, they’re adhering to a 2002 rule prescribed by the Securities and Exchange Commission in response to the Enron and WorldCom accounting frauds. That rule, known as Regulation G, allows companies to use nontraditional metrics in financial reports, but only if they present generally accepted accounting measures alongside so that investors can compare the two.

If the S.E.C. wanted its rule to discourage accounting gimmickry, it failed, Mr. Ciesielski said. “The S.E.C. inadvertently legitimized the practice with Regulation G,” he added. “It’s defining behavior down — once people start doing this, everybody’s got to be on the same page. If company Y is backing out stock-based compensation, why wouldn’t company X do the same? Its results would only look worse if it didn’t.”

To plumb the popularity and pervasiveness of such metrics, Mr. Ciesielski and his associates analyzed filings from technology and health care companies in the Standard & Poor’s 500-stock index. They identified those that presented nontraditional figures to investors and compared those results with the companies’ actual earnings for 2011 and 2012.

Technology and health care industries are both heavy users of adjusted earnings measures in their financial statements, Mr. Ciesielski said. Of the 69 technology companies in the index, he found that 56 used non-GAAP earnings presentations; of the 54 health care companies, 45 used them.

Intel Reports Slight Drop in Earnings

Brian Krzanich, Intel’s chief executive, showed off prototypes last month that utilize the company's new line of chips aimed at wearable computers and sensors connected to the Internet.

SAN FRANCISCO — Intel reported earnings on Tuesday that were slightly lower than the same quarter a year ago, reflecting a drop in demand for personal computers.

Intel's stock performance over the last year.News from the technology industry, including start-ups, the Internet, enterprise and gadgets.
On Twitter: @nytimesbits.

The company, the world’s largest semiconductor maker, reported that net income in the third quarter was $2.95 billion, or 58 cents a share, just a bit below the year-ago quarter. Revenue was slightly higher, at $13.5 billion.

“We are executing on our strategy to offer an increasingly broad and diverse product portfolio,” Brian M. Krzanich, Intel’s chief executive, said in a statement accompanying the release. He called the quarter “modest growth in a tough environment.”

The net income was above the expectations of Wall Street analysts. They had expected 53 cents a share and revenue of $13.47 billion, according to a survey of analysts by Thomson Reuters.

Intel, based in Santa Clara, Calif., has long dominated the market for PCs and computer servers, but was slow to move into mobile devices like smartphones and tablets. Mr. Krzanich, who took over last spring, has said that he is taking steps to fix the problem, but that results will take time.

Stark Earnings for Intel Reflect Its Changing Market

For years, Intel executives scoffed at potential threats to its computer chip business from makers of less expensive chips for video games and mobile phones. The largest maker of chips, Intel continued to focus on putting those chips in personal computers, where they could be sold at a high profit margin.

That strategy appears to have run its course. The quality of mobile and gaming chips made by other companies has improved to a point where they run most of the world’s mobile phones and tablets. And partly because more people are turning to those mobile devices, PC sales are waning.

The move to mobile devices started to hurt Intel’s results in recent quarters, but the quarterly earnings that the company reported on Wednesday were particularly stark. Net income was $2 billion, or 39 cents a share, a drop of 29 percent from a year earlier. Revenue was $12.8 billion, down 5 percent.

Intel’s results were slightly below expectations. Analysts had predicted 40 cents a share and revenue of $12.9 billion, according to a survey of analysts by Thomson Reuters. Intel cut projections for annual revenue, gross margin and research and development.

“At the end of the day, the market will go where the market goes,” Brian M. Krzanich, Intel’s chief executive, said in a call to analysts after the earnings were released. “We’ve not always lived up to the standards we’ve set for ourselves.”

Mr. Krzanich, who took over in May, has previously said that Intel was slow to see the threat from tablets and smartphones. On Wednesday, he said that organizational changes, along with a renewed commitment to looking for “the next big thing,” would bring Intel back.

In the near term, this means going after the lower end of the PC and tablet market. A new chip will be out in time for the Christmas season, he said, in notebook-type computers that will be sold for as little as $300 and tablets costing $150. Intel also has plans to soon put new chips in higher-end touch-screen devices.

“He’s got to manage in a very tough environment,” said Douglas Freedman, analyst with RBC Capital Markets, referring to Mr. Krzanich. “Intel has done a good job showing they can make chips for mobile devices and tablets, but in the next three or four quarters he has to show he can bring that home.”

While chips for PCs still make up almost three-quarters of Intel’s revenue, few analysts expect the PC market to recover to its old highs. Last week, International Data Corporation said that PC sales fell 11.4 percent in the second quarter of the year. Most of the developed world is now saturated with the machines, and people are buying replacement computers at a slower rate.

Mr. Krzanich said Intel would “leave no computing opportunity untapped” to make up for the loss. In particular, he said, Intel’s “highest priority” would be small mobile devices.

Mr. Krzanich has also focused on cost-cutting and streamlining at the company, giving Mr. Freedman and others some hope that Intel’s profit will rebound.

In Wednesday’s call, the company noted that Microsoft’s Surface Pro tablet, which carries a high-margin Intel chip, was not counted in the PC sales numbers by I.D.C. and others. The analysis firm has said, however, that in the first quarter of this year Microsoft’s tablets, including tablets not carrying Intel chips, had just 4.4 percent of the tablet market, compared with 39 percent for Apple’s iPad. There is little to suggest significant improvement from there, an I.D.C. analyst said.

At Verizon, Wireless Aids Earnings Rise

A surge in wireless subscribers and smartphone sales, combined with more subscribers to its digital TV and Internet services, propelled the company to a profit of $2.25 billion in the second quarter, up 23 percent from the same period a year earlier.

Verizon, which is based in New York, said investment in its fourth-generation wireless network, called LTE, helped its growth. For its wireless business, the company added 941,000 contract subscribers, the most valuable type of customer.

The company also reported improved smartphone sales, partly on the back of demand for the iPhone. In the quarter, Verizon sold 7.5 million smartphones, including 3.9 million iPhones. In the year-ago quarter it sold 5.9 million smartphones, including 2.7 million iPhones.

Like other wireless carriers, though, Verizon appears to be keeping an eye on industry data showing that fewer people are upgrading to new smartphones year after year. To combat that trend, two of its top competitors, AT&T and T-Mobile USA, recently announced plans that would make it cheaper for customers to upgrade their phones before the typical two-year wait.

On Thursday, Verizon, the No. 1 wireless carrier, announced a similar plan. Verizon’s program, called Edge, will allow customers to pick the phone they want and then sign up for a monthly payment plan. The full price of the phone will be spread over 24 months. The customer can upgrade in as little as six months by paying off 50 percent of the original phone by then.

“Our customers have been asking for another option,” said Francis J. Shammo, Verizon’s chief financial officer, on the company’s earnings call. He said some people did not want to wait two years before buying a new smartphone.

But Verizon’s early-upgrade plan appears likely to attract only a small portion of the market, the high-spenders who must have the latest and greatest smartphones. Craig Moffett, an analyst at Moffett Research, said that plan was unlikely to add much to the company’s profits. But Verizon’s move, he said, shows that it is reacting to T-Mobile, the fourth-largest American carrier, which was the first carrier to introduce early-upgrade plans.

“I think T-Mobile’s plan is taking share, and they have to do something about it,” he said.

Over all, Verizon’s revenue rose 4.3 percent, to $29.8 billion, compared with the same quarter a year ago. The company’s net income was 78 cents a share, compared with 64 cents a share in the period a year ago. After excluding a one-time gain related to pension benefits, Verizon’s net income was 73 cents a share, beating analyst expectations of 72 cents, according to data from Thomson Reuters. Shares of the company were down 1.5 percent to close at $49.97 on Thursday.

Verizon is planning to invest even more money in the 4G network. It said it would increase capital spending this year to between $16.4 billion and $16.6 billion, an increase from its original plan to spend $16.2 billion.

The company also said that it added 161,000 subscribers to its Internet service and 140,000 to its video service. Verizon’s Internet service now has 5.8 million subscribers and its video service has 5 million.

H.P. Earnings Are Higher Than Expected

H.P. reported that net income fell 31 percent to $1 billion, or 55 cents a share, from the year-ago quarter. Revenue fell 10 percent, to $27.6 billion, H.P. said.

“We beat the upper end” of company projections for the quarter, Meg Whitman, H.P.'s chief executive, said in a statement accompanying the earnings. “I feel good about the rest of the year.”

The net income was above the expectations of Wall Street analysts, who mark their revenue and earnings projections based on nonstandard accounting. By those measures, H.P. had net income of 87 cents a share.

Analysts had projected H.P. would make 81 cents a share, on revenue of $28.12 billion, according to a survey of analysts by Thomson Reuters.

H.P., the world’s largest maker of personal computers and printers, has struggled for years with a declining market for PCs, less printer demand and turmoil in its executive ranks.

Ms. Whitman, who took over in September 2011, has said that fixing the company will be a five-year process and has described 2013 as a year of rebuilding before growth accelerates in 2014.

Dell’s Earnings Fall 79% as Sales of PCs Fade

Michael Dell, the chief executive, and the private-equity house Silver Lake want to take the world’s third-largest PC maker private for $24.4 billion, arguing that its transformation into a provider of enterprise-computing services was best conducted away from public market scrutiny.

Reflecting that shift in focus, Dell reported Thursday that revenue from enterprise solutions, services and software was up 12 percent to $5.5 billion, while overall revenue slipped 2 percent. Its “end-user computing division,” linked to PC sales, slid 9 percent.

Icahn and a major stakeholder, Southeastern Asset Management, say Michael Dell’s deal is too cheap for a company trying to challenge I.B.M. and Hewlett-Packard in enterprise computing. They are proposing new leadership and additional cash or stock for shareholders.

Net income fell to $130 million from $635 million a year earlier. Excluding certain items, income was down 51 percent to $372 million, or 21 cents a share, from $761 million, or 43 cents a share, a year earlier. That lagged by far the 35 cents Wall Street had expected.

Revenue in its fiscal first quarter ended May 3 fell to $14.1 billion, higher than the average analyst estimate of $13.5 billion, according to Thomson Reuters.

The company said it could not provide a financial outlook because it was in the midst of Michael Dell’s go-private deal.

Shares in Dell stayed flat in after-hours trade, at $13.44, after closing at $13.43 on Nasdaq.

Mobile Ads Help Propel Earnings At Facebook

Those concerns were silenced a bit on Wednesday, when Facebook’s earnings report offered early signs that the company was cracking the mobile revenue code.

In the first three months of the year, the company’s mobile advertising generated $375 million in revenue, exceeding what analysts had expected. Mobile revenue accounted for 30 percent of the company’s advertising revenue in the first quarter of this year, compared with 23 percent in the same period last year.

“What we have seen has made us more confident we can do more with advertising over time,” the company’s chief executive and co-founder, Mark Zuckerberg, told analysts on an earnings call on Wednesday. He said one of his top goals was to build “the best mobile product” — and make money from it.

Despite the strong mobile numbers, investors did not extol the company on Wednesday, largely because it continues to spend a lot of money to develop new features. The company’s shares fell about 1 percent, closing at $27.43, before the earnings were reported. Facebook shares swung up and down in after-hours trading but ended at $27.51.

Just last year, Mr. Zuckerberg said that Facebook was late in retooling itself for the mobile era. At Facebook headquarters, morale-raising posters went up on the walls screaming “Our Mobile Future.”

Since then, Facebook has introduced more than a half-dozen advertising products. They include what are called app-install ads, which are meant to help app developers draw new customers and more refined advertising tailored to consumers’ online and offline behavior.

Facebook has recently partnered with third-party data companies that track who buys soda at the supermarket and who is planning to buy a car in the next six months.

Facebook executives said the company planned to hone its targeting even more.

Two-thirds of Facebook’s 1.1 billion users across the world log into the site on their phones, the company said Wednesday, accounting for what executives described as strong growth in populous countries like India and Brazil.

For those mobile users, the changes mean more ads when they log in on their cellphones and eventually more finely targeted ads. And they mean a redesigned News Feed, a feature introduced in March, that offers marketers a chance to show off pictures and bigger and more prominent links.

“We want content in ads that’s as good as content from a friend or somewhere else on the site, as well as to have a higher return for marketers,” said Sheryl Sandberg, the company’s chief operating officer. “Those go hand in hand. What you’ll see from us is better targeting.”

All told, revenue increased 38 percent, to $1.46 billion, exceeding the $1.44 billion estimate of financial analysts surveyed by Bloomberg News. The company had $219 million in net income. It reported a profit of 12 cents a share, missing the average estimate by a penny.

“Over all, they’re on track,” said Aaron Kessler, an analyst with Raymond James. “They’re still rolling out new products for advertisers. They’re definitely more focused on creating shareholder value and driving revenue growth.”

In early April, the company introduced mobile software for Android phones called Facebook Home that is intended to nudge Facebook users to return to their mobile News Feeds even more frequently than they do now.

The new suite of applications effectively turns the News Feed into the screen saver of a smartphone, updating it constantly with Facebook posts and messages. It appears to be only a matter of time until the company introduces ads there.

Last May, Facebook held a widely publicized initial public offering of stock, at a price of $38 a share. Its fairy tale rise took a sharp dive almost immediately, resulting in lawsuits and angry recriminations. Its shares slumped to half the opening price at one point last fall, and they have inched up cautiously since then.

On Wednesday, Facebook filed a motion asking a federal judge to dismiss a lawsuit that accused the company of misleading investors about its financial strategy before the public offering, Reuters reported. The company said in court papers that it was not legally obligated to disclose publicly how mobile adoption would affect its financial performance in the future.

Wall Street analysts have watched closely for signs of Facebook fatigue among users. In the first quarter, they point out, fewer monthly users returned to Facebook on their desktop computers in the United States and Europe, according to comScore figures.

Analysts worried whether that meant that users in more mature and lucrative markets were getting bored with Facebook. But they noted that the figures applied only to desktop users and revealed little about mobile users of Facebook.

I.B.M. Shares Fall After Earnings Miss Estimates

In the past, the company’s cost-cutting discipline and a steady shift toward higher-profit offerings have enabled it to keep earnings steaming ahead, surpassing Wall Street’s forecasts, even during the recession. Revenue growth has long been modest, but nothing like the falloff in the first quarter, down 5 percent, to $23.4 billion compared with the year-ago period. Net income was off 1 percent, to $3 billion.

“This is very uncharacteristic,” said A. M. Sacconaghi, an analyst at Sanford C. Bernstein. “We’re seeing I.B.M. struggle.”

The question, analysts say, is whether the company is facing a temporary setback or whether its hardware business might be a drag on revenue and profits for a while.

In a conference call, Mark Loughridge, I.B.M.’s chief financial officer, said that the quarter ended far weaker than it began, and that some anticipated mainframe and software deals failed to close. “We’re not immune from the global economy,” he said, but largely attributed the slump to a sales “execution problem.”

I.B.M. is the largest supplier of information technology — hardware, software and services — to corporations and government agencies worldwide, and its results are watched as a guide to broader trends in business technology spending.

The once-hot China market, Mr. Loughridge said, grew by “a disappointing 1 percent.” The recent change in Chinese leadership, he said, may have brought an investment pause as national and local plans are fine-tuned.

But he said parts of the hardware business are facing a longer transition. The mainframe division, he said, is healthy. The troubles seem to be in units that sell industry-standard data center computers, typically powered by Intel chips, and larger data center computers that use I.B.M.’s Power chips.

To cut costs, he said, I.B.M. planned to take most of $1 billion yearly in charges to trim the payroll in the current quarter. He said most of the affected workers would be outside the United States.

I.B.M.’s earnings results fell short of analysts’ estimates, for the first time since 2005.

The profit performance was 5 cents below expectations of $3.05 a share, as compiled by Thomson Reuters. Operating earnings rose 8 percent to $3 a share, compared with $2.78 a share last year; these earnings typically surpass the net income results because I.B.M. spends billions each year buying its own shares, so there are fewer.

Revenue for the quarter declined to $23.4 billion, held down by the continuing economic weakness in some markets and a stronger dollar. Its revenue fell below the Wall Street forecast of $24.7 billion.

In after-hours trading, I.B.M. shares were down 4.2 percent to $198.45 a share. During the regular session, when stock prices fell in general and before I.B.M. reported earnings, its shares closed at $207.15, off $2.52, or 1.2 percent.

Businesses that I.B.M. has earmarked for growth performed robustly. For example, its so-called Smarter Planet division, which sells mainly software and services to governments and companies to streamline product distribution, reduce energy consumption and manage traffic, rose more than 25 percent.

But growth units could not offset weak demand elsewhere. Revenue for its big services business, which accounts for half of I.B.M.’s revenue, was down 4 percent. Its software business was flat for the quarter, while hardware sales fell 17 percent.

Analysts say the hardware problem could point to a structural shift as companies tap computing resources from remote data centers run by others — so-called cloud computing — instead of building out their own data centers. Still, I.B.M. reported that its own cloud computing unit grew more than 70 percent.

Intel 4th-Quarter Earnings Are Sharply Lower

The world’s biggest maker of semiconductors, which grew by supplying chips to most of the world’s personal computer makers, is now facing an erosion of that market. According to Gartner, a market analysis firm, PC shipments worldwide declined 3.5 percent in 2012.

The result was evident Thursday in Intel’s fourth-quarter earnings report. The company, which is based in Santa Clara, Calif., reported net income of $2.5 billion, or 48 cents a share, down 27 percent from $3.4 billion, or 64 cents a share, a year earlier. Revenue fell 3 percent to $13.5 billion from $13.9 billion.

“The PC business as we’ve known it is evolving,” said Paul S. Otellini, Intel’s chief executive, in a call to analysts. “The form factors are going to blur here.”

Instead of PCs, more people and businesses are buying smartphones and tablets. Intel gets 64 percent of its revenues and some of its highest profit margins from chips for PCs. It has scrambled to revive the market, while it aggressively tries to supply tablet and smartphone makers, so far with little success.

But even as it gets harder to sell PCs, Intel appears to have managed its business better than many investors thought possible. Revenue was in line with analysts’ expectations, according to a survey by Thomson Reuters, but net income was higher than the 45 cents a share that the analysts were expecting, on average.

Intel projected lower revenue and pressure on its profit margins for 2013, however, which sent its shares down about 5 percent in after-hours trading. Intel shares finished regular trading at $22.68, up 57 cents.

At the after-hours price, Intel’s market capitalization dropped below that of Qualcomm — a smaller maker of chips, but a company that makes chips for smartphones and tablets. Even a year ago, this would have been unthinkable.

Over the last six months, shares of Intel have fallen about 18 percent, while Qualcomm’s stock is up almost 20 percent. ARM Holdings, which sells designs for low-power chips popular in mobile devices, is up almost 90 percent in that time.

“Longer term, Intel will move more aggressively into smartphones,” said Bobby Burleson, an analyst with Canaccord Genuity. “But everyone worries about their long-term gross margins.”

Intel, which employs an engineering-focused staff of 105,000 people, plans to continue to invest heavily in research and development, as well as new manufacturing facilities. Intel operates on the principle that making the biggest volumes of the most advanced chips gives it a quality and profit margin advantage.

Despite the lower earnings, Intel said it would spend $18.9 billion on research and development, along with marketing and administrative costs, in 2013. Two years ago Intel spent $16 billion on those things, increasing that amount to $18.2 billion last year.

“Our manufacturing leadership becomes increasingly valuable,” said Stacy J. Smith, Intel’s chief financial officer. “People expect Intel to make more powerful, more efficient devices. That applies across all our businesses.”

That works, as long as the chips have buyers. Last year Intel hoped two PC industry initiatives would woo buyers back to PCs, but neither did. One, backed by a large investment from Intel, was in lightweight ultrabook laptop computers, many of which had tablet features, like touch screens. These came to market later than analysts had expected, at prices most consumers did not find attractive.

The other, Microsoft’s release of its Windows 8 operating system, has so far failed to excite buyers. Consumers and businesses did not buy new computers in order to use the upgraded system.

Mr. Otellini remained upbeat about ultrabooks, saying that there were now 140 types of the lightweight laptops on the market. The number of styles and different ways they use things like keyboards and touch screens, he said, would make it harder to tell a PC from a tablet.

“We’re in the midst of a radical transformation with the blurring of form factors,” he said, adding that this year Intel would introduce a new chip, called Haswell, which would help in the production of lightweight machines that have longer battery life. He said little about Windows 8.

Intel’s second-largest business, chips for computer servers in data centers, reflected an overall strength in that industry. Fourth-quarter sales to data centers was $2.8 billion, an increase of 4 percent from a year earlier.

Texas Instruments Forecasts Slowing Earnings

Texas Instruments reported Monday that its quarterly revenue fell 2.3 percent as demand for its chips slipped on economic concerns, and the company forecast more weakness this quarter.

The chip maker has been under pressure from a weak global economy and a wavering personal computer industry and is struggling to fill manufacturing capacity it bought for pennies on the dollar after the global credit crisis.

“Across the board, we’re seeing customers being extremely cautious, very careful about the level of inventory that they hold so giving us very low levels of visibility as to what they’ll want to order for the quarter,” Texas Instruments’ chief financial officer, Kevin March, said in an interview.

Texas Instruments, which makes chips used in products ranging from consumer electronics to industrial equipment, reported a profit of $784 million, or 67 cents a share, up 30.4 percent from $601 million, or 51 cents a share, in the year-ago quarter.

Revenue declined to $3.39 billion from $3.47 billion in the year-earlier quarter.

The company forecast fourth-quarter earnings of 23 cents to 31 cents a share on revenue of $2.83 billion to $3.07 billion.

Analysts on average had been expecting Texas Instruments’ revenue in the current quarter to be $3.24 billion, according to Thomson Reuters.

“It’s definitely light,” said Stacy Rasgon, an analyst at Bernstein Research. “But I don’t know how surprising that is given what we’ve seen in semiconductors and tech recently.”

The company’s inability to fully use its fabrication plants has investors worried about its profitability.

“With the macroeconomic slowdown we’re experiencing, and T.I.’s excess capacity — they’re only using about 75 percent of their capacity right now — they’re going to be under some longer-term pressure to try to fill those fabs,” said JoAnne Feeney, an analyst at Longbow Research.

DealBook: Google's Earnings Incident Shines Light on a Stealth Industry

Google, via European Pressphoto AgencyMike Barham, a technician for Google, at the company’s data center in Dalles, Ore.

A little-known fact regarding corporate earnings was unexpectedly revealed last week when the third-quarter earnings for Google were filed with the Securities and Exchange Commission several hours ahead of schedule.

The filing hit the markets like a missile. Google’s stock quickly fell 9 percent before trading was halted 21 minutes. Google quickly pointed the finger at R.R. Donnelley & Sons, the S.E.C. filings agent that Google has used since the company’s first filing on April 29, 2004.

Considering the importance of earnings information, especially for widely held stocks like Google, the incident raises questions about whether the information could fall into the wrong hands. A growing number of companies are increasingly aware of this and are bringing the S.E.C. filings function in-house, at least when it comes to their earnings reports.

Doug Fitzgerald, a spokesman for R.R. Donnelley did not respond to several requests for comment. Donnelley, which dates back to 1864, has long dominated this market. Estimates vary, but it is believed that it has as much as 70 percent of the filings market.

Until Thursday, it wasn’t widely known that filings agents like Donnelley had access to a client’s earnings in advance – sometimes as much as 48 hours early.

During that time, the filings agent “Edgarizes” the filing – that is, making various changes to the underlying code. That involves converting the file from standard HTML to something called EDGAR HTML so that the content can be submitted to the S.E.C.’s Edgar system.

Typically, several test files are sent to the S.E.C. to make sure everything is correct before the real filing is transmitted, said Rob Mossefin, a vice president of production at FilePoint, a filing agent based in Raleigh, N.C.

“Once you push the live filing button, it’s like pushing the big red button. There’s no getting it back,” Mr. Mossefin said. That appears to be exactly what happened on Thursday: a draft of Google’s earnings – the filing said “Pending Larry quote” at the top to indicate that a quote was coming from the chief executive, Larry Page – was accidentally filed with the S.E.C. and went live instantly.

While Google’s premature filing was the most prominent example, other incidents over the last few years have involved similar inadvertent releases of information. Most of those, however, have involved a company posting a release on its own Web site prematurely, instead of submitting a filing via the S.E.C.

Two years ago, Microsoft, the Walt Disney Company and NetApp used Web addresses similar to previous releases to upload current earnings information before they were publicly available. That gave anyone looking for the earnings an instant edge.

In other cases, the use of outside firms could lead to deliberate leaks of confidential insider information. Two years ago, a low-level employee at Google’s outside investor relations firm, Market Street Partners, was connected to the convicted former hedge fund manager Raj Rajaratnam for providing details of earnings for Google and Akamai Technologies. Google quickly fired the firm.

Some of these issues could be resolved by bringing the filings processes in-house. On the same day that R.R. Donnelley filed earnings for Google, other companies including Boston Scientific, Halliburton, Sandisk and Southwest Airlines filed their earnings without using a filing agent.

Some, like Intel, which released its earnings last Tuesday, have been doing it this way for years. Most of these companies use third-party software platforms to handle the filings in-house.

“The more we can control the earnings release, the better off we are,” said an Intel spokesman, Chuck Mulloy, adding that Intel has been doing it this way for at least 18 years. “We own the liability and the risk, and this allows us to maintain the integrity of the reporting process. If there’s a problem, it’s our problem.”

An executive at Webfilings, a company based in Ames, Iowa, that sells an application that allows companies to self-file, used last week’s events as a marketing opportunity, reminding customers that “this unnecessary mistake reinforces the need for public companies to completely control the release of their financial data,” as Mike Sellberg wrote on the Webfilings blog.

A spokeswoman for Google declined to comment on why the company doesn’t handle its filings in-house. Kevin Callahan, a spokesman for the S.E.C., declined to comment on whether the agency was investigating Google’s early release. It is also unclear whether the S.E.C. thinks there is a larger worry about earnings winding up in the wrong hands before being made public.

But given Google’s technical prowess, it could easily move its earnings release in-house to prevent future problems.

“Our biggest challenge is the status quo,” said Matt Rizai, chief executive of Webfilings. “We represent technology that disrupts the industry.”

Michelle Leder is the editor of footnoted.com, a Web site that takes a closer look at companies’ regulatory filings.

Earnings Report Gives Yahoo’s New Chief a Good Start

Yahoo reported stronger earnings than a year earlier, but future growth remained uncertain. “We have a fundamental foundation on which to grow,” Ms. Mayer said in a conference call with analysts. “We believe Yahoo’s best days lie ahead. We intend to win.”

Largely because of a long-awaited sale of its stake in Alibaba last month, Yahoo reported Monday that net income in the third quarter, which ended Sept. 30, rose sharply to $3.16 billion, or $2.64 a share, from $293 million, or 23 cents a share, in the same quarter a year ago. That included a net gain of $2.8 billion related to the Alibaba sale and restructuring charges of $16 million, the company said.

That news sent Yahoo’s shares up 4 percent in after-hours trading, but some analysts were less sanguine. “Earnings were decent — hooray! — the wheels didn’t come off the bus,” said Colin Gillis, an Internet analyst with BCG Partners. “But there are still some serious issues facing her.”

Those problems start with the company’s stagnant revenue, which was $1.2 billion in the quarter. Its income from operations decreased 14 percent, to $152 million from $177 million in the year earlier period.

With 700 million users each month, Yahoo remains one of the most visited sites on the Web, but it has been ceding its share of the online display ad market to rivals like Facebook and Google.

Its search business, which Yahoo outsourced to Microsoft in 2009, is on its last legs, propped up only because of a revenue-guarantee clause in its contract with Microsoft.

In the call with analysts, Ms. Mayer acknowledged that Yahoo’s search deal with Microsoft had been disappointing. “We’ve experienced some disappointment on the monetization, which is why the revenue guarantee is in place,” she said. Yahoo’s revenue guarantee expires in March. Without the guarantee, Yahoo’s revenue could fall next year by $100 million.

Ms. Mayer, who joined the company in July after 13 years at Google, said Yahoo’s top priority was to “make the world’s daily habits inspiring and entertaining.” She said Yahoo would renew its focus on its search business, modernize its home page, mail and messenger services, develop a mobile presence and seek out “double-digit million-dollar” acquisitions.

She said the company was “very well-positioned” to capitalize on the shift of consumers to mobile devices. Noting that the most frequent use of smartphones was checking weather, sports scores, financial information, watching videos, sharing photos, getting news and playing games, she asked, “Does that sound like any particular company that you know?”

To lure engineers to the company and to improve employee morale, one of the first things Ms. Mayer did was offer free cafeteria food and give employees the option to trade in their BlackBerry phones for iPhones and Android-powered smartphones.

“Cultural change can’t be bought and the vast majority of what we’ve done has cost nothing,” Ms. Mayer said of those moves. “I’m already impressed in the change in our applicant pool.”

Google Shares Drop After Earnings Disappoint

For Google, mobile has been a mixed blessing. Smartphones and tablets are bringing in new users — and the advertisers that follow them — but it makes less money on mobile ads than on desktop ads.

The company reported that the price advertisers paid per click on an ad — referred to as cost per click — decreased 15 percent from the same period last year. This was the fourth consecutive quarter that number has declined, even as the number of paid clicks on ads climbed 33 percent, largely because people see Google ads on their phones on lunch break or in bed, not just when they are in front of a computer.

The challenges of making money in a mobile world were not the only reason that Google’s net revenue and earnings per share fell significantly below analysts’ expectations. Motorola Mobility, the ailing cellphone maker it recently acquired, is bleeding money.

Still, the report showed that Google was grappling with the mobile revenue riddle. And Google is not alone. The problem is also stumping technology companies like Facebook, Apple and Microsoft. Just as the Web upended traditional business models for print publications more than a decade ago, now mobile is disrupting Web businesses.

“All of these mobile devices are generating clicks that are just less valuable to advertisers,” said Colin Gillis, an analyst at BGC Partners, who said mobile ad clicks cost half of what clicks on desktop Web ads cost. “The supply part is doing so well, but the supply’s going to continue and continue to grow and they could devalue their inventory.”

As usual, Google was scheduled to release its earnings after trading closed, but because of a financial publisher’s error, the company mistakenly filed the report with the Securities and Exchange Commission several hours earlier than planned. The stock price immediately plummeted more than 9 percent, or $68, before Nasdaq halted trading in its shares in the early afternoon. Shares ended the day down 8 percent and rose 1 percent in after-hours trading.

Google executives took pains Thursday in the conference call with analysts to reassure investors that it was prepared for the challenges from mobile, and that it was already shifting its business models to adjust.

“Monetization on mobile queries right now is a significant fraction of desktop,” Larry Page, Google’s chief executive, said.

He said Google was exploring new ways to make more money as people increasingly used phones and tablets in addition to and instead of desktop computers, and said it was “uniquely positioned to get through that transition and to profit from it.”

“I am not worried about this in terms of our business at all,” Mr. Page said. “I think it’s an opportunity for us.”

The company said it was on track to generate $8 billion in the coming year from mobile, including ads and sales of apps. It did not break down how much of that would come from advertising, but said it was a large majority.

Also, the decline in click prices was not just because of mobile ads, said Patrick Pichette, Google’s chief financial officer, but also because of other factors including currency headwinds, the balance between developed and emerging markets, the number of ads shown on Google sites versus other sites in its network and changes in types of ads.

But the explosion of mobile users and ads has presented difficulties. Google has 55 percent market share in mobile ad revenue, and 95 percent for mobile search ads, according to eMarketer, the digital advertising research firm. Yet the ads cost less in large part because advertisers are not yet convinced that they are as effective as desktop ads.

This article has been revised to reflect the following correction:

Correction: October 18, 2012

Because of an editing error, an earlier version of this article misstated the loss for the day on Google’s stock. It was 8 percent, not 8.3 percent.

Business Briefing | Company Earnings: Disappointing Results at a Business Software Maker

Along with the United States government, businesses will have important roles to play to encourage reform.

A Russian tradition flatters writers in a culture where literature has special prestige. But the surprise also promotes the cult of the unpredictable czar.

Sony Reports Loss and Lowers Full-Year Earnings Forecast

TOKYO (AP) — Sony’s losses worsened in the April-to-June quarter, and the company lowered its full-year earnings forecast on Thursday, citing problems caused by a strong yen and declining sales of its liquid-crystal-display products.

The Japanese electronics and entertainment company reported that it lost 24.6 billion yen ($315 million) in its fiscal first quarter, compared with a 15.5 billion yen loss a year earlier.

Sales increased 1.4 percent to 1.52 trillion yen ($19.4 billion), helped by cameras, professional broadcasting products and mobile phones.

Sony lowered its earnings forecast for its fiscal year ending in March 2013 to 20 billion yen ($256 million), down from 30 billion yen projected in May, citing uncertainty in foreign exchange rates and global demand.

The company said it was hurt in the quarter by a strong yen, which erodes overseas earnings, and by declining sales of liquid-crystal-display TVs and video game machines. It also reported 20 billion yen in income tax expense and 11.3 billion yen in restructuring charges for the quarter, and invested heavily in image sensor production.

Sony posted a loss of 456.7 billion yen ($5.84 billion) in its last business year. That was the fourth straight year of losses and the biggest loss in the 66-year history of the company, maker of PlayStation game machines, the “Spider-Man” movies and the Walkman portable audio player.

Once the stellar brand symbolizing Japan’s technological prowess, Sony has lost its shine. It is getting beaten by Samsung Electronics of South Korea in TVs, and by Apple with devices like the iPhone and iPod.

The key to Sony’s turnaround is stopping the red ink in its TV business, which has lost money for eight consecutive years. The losses are expected to continue for the current business year, and the company has yet to carve out the new areas for profit that it has long promised, like smartphones and tablet computers.

Sony is aiming for a comeback under its new president, Kazuo Hirai, chosen in February, who previously led the company’s game division and built his career in the United States.

The company said that TV sales had fallen in the latest quarter, but that operating losses in the division had been cut to less than half of what they were the year before.

In its movies division, Sony achieved a 6.2 percent increase in sales with the hit “Men in Black 3” and better cable and network program revenue. But it reported an operating loss in part because of marketing expenses for this year’s films, including “The Amazing Spider-Man.”

In music, the company had lower sales and profit partly, it said, because the overall music market shrank. Best sellers included Carrie Underwood’s “Blown Away” and Usher’s “Looking 4 Myself.”

Sony also struggled in games, with lower sales of its PlayStation Portable hand-held console and PlayStation 3 home console, as well as software for those machines. These losses were only partly offset by sales of the PlayStation Vita portable, which went on sale in December.

Sony shares, which have lost more than half of their value over the last year, gained 2.44 percent to 964 yen ($12.33) in Tokyo. Earnings were announced after the market closed.

This article has been revised to reflect the following correction:

Correction: August 4, 2012

A subheading on Friday with an article about Sony’s fiscal first-quarter earnings characterized the results incorrectly. The biggest loss in the company’s 66 years was the $5.84 billion loss for its last business year, not the loss it posted for the first quarter.

Sony Reports Loss and Lowers Full-Year Earnings Forecast

TOKYO (AP) — Sony’s losses worsened in the April-to-June quarter, and the company lowered its full-year earnings forecast on Thursday, citing problems caused by a strong yen and declining sales of its liquid-crystal-display products.

The Japanese electronics and entertainment company reported that it lost 24.6 billion yen ($315 million) in its fiscal first quarter, compared with a 15.5 billion yen loss a year earlier.

Sales increased 1.4 percent to 1.52 trillion yen ($19.4 billion), helped by cameras, professional broadcasting products and mobile phones.

Sony lowered its earnings forecast for its fiscal year ending in March 2013 to 20 billion yen ($256 million), down from 30 billion yen projected in May, citing uncertainty in foreign exchange rates and global demand.

The company said it was hurt in the quarter by a strong yen, which erodes overseas earnings, and by declining sales of liquid-crystal-display TVs and video game machines. It also reported 20 billion yen in income tax expense and 11.3 billion yen in restructuring charges for the quarter, and invested heavily in image sensor production.

Sony posted a loss of 456.7 billion yen ($5.84 billion) in its last business year. That was the fourth straight year of losses and the biggest loss in the 66-year history of the company, maker of PlayStation game machines, the “Spider-Man” movies and the Walkman portable audio player.

Once the stellar brand symbolizing Japan’s technological prowess, Sony has lost its shine. It is getting beaten by Samsung Electronics of South Korea in TVs, and by Apple with devices like the iPhone and iPod.

The key to Sony’s turnaround is stopping the red ink in its TV business, which has lost money for eight consecutive years. The losses are expected to continue for the current business year, and the company has yet to carve out the new areas for profit that it has long promised, like smartphones and tablet computers.

Sony is aiming for a comeback under its new president, Kazuo Hirai, chosen in February, who previously led the company’s game division and built his career in the United States.

The company said that TV sales had fallen in the latest quarter, but that operating losses in the division had been cut to less than half of what they were the year before.

In its movies division, Sony achieved a 6.2 percent increase in sales with the hit “Men in Black 3” and better cable and network program revenue. But it reported an operating loss in part because of marketing expenses for this year’s films, including “The Amazing Spider-Man.”

In music, the company had lower sales and profit partly, it said, because the overall music market shrank. Best sellers included Carrie Underwood’s “Blown Away” and Usher’s “Looking 4 Myself.”

Sony also struggled in games, with lower sales of its PlayStation Portable hand-held console and PlayStation 3 home console, as well as software for those machines. These losses were only partly offset by sales of the PlayStation Vita portable, which went on sale in December.

Sony shares, which have lost more than half of their value over the last year, gained 2.44 percent to 964 yen ($12.33) in Tokyo. Earnings were announced after the market closed.

Ericsson Earnings Decline 63 Percent in 2d Quarter

BERLIN — Ericsson said Wednesday that its profit fell by 63 percent in the second quarter, as telecommunications carriers trimmed spending on equipment in the United States, Russia and China.

Net income fell to 1.2 billion Swedish kronor, or $172 million, on a 1 percent increase in sales, to 55.3 billion kronor, Ericsson said.

Shares of the company, which is based in Stockholm, fell by 2.6 percent to 57.3 kronor in afternoon trading Wednesday.

Hans Vestberg, the chief executive of Ericsson, told analysts in Stockholm that economic slowdowns in Russia and China had weighed on profits, along with falling demand for older network gear in North America, where operators are activating new, upgraded networks.

The decline was also driven by mounting losses at ST-Ericsson, a venture with Swiss chip maker ST Microelectronics that makes mobile-phone modems and components. The loss at the Geneva-based venture nearly doubled to 1.3 billion kronor from 700 million a year earlier.

Investors are closely monitoring signs of a further global slowdown, which would show up in the results of Ericsson, the biggest maker of telecommunications equipment.

“They are signaling that China may be on the weak side going forward and we already knew that Russia was coming down,” said Hakan Wranne, an analyst at Swedbank in Stockholm. “But the biggest concern is the U.S. market, which will continue to be weak.”

Sales of network equipment in North America, a region that accounted for nearly one quarter of Ericsson’s global sales, fell by 22 percent in the quarter. The decline came as carriers such as Sprint and Verizon Wireless replaced their older gear, which runs on a 1980s technology called Code Division Multiple Access or CDMA, with new networks built on a Internet-based transmission technology called Long Term Evolution, or LTE.

Globally, sales of CDMA equipment fell by 50 percent amid the transition to LTE grids, Ericsson said.

Ericsson partially offset weakness in its main network equipment business by selling outsourcing and software to carriers. Sales of services and software rose 29 percent in the period to 27.6 billion kronor from 21.4 billion, generated half of Ericsson’s quarterly sales.

Despite its falling profits, Ericsson is still faring better than some competitors. Alcatel-Lucent, the French network equipment maker, and ZTE, a Chinese rival, both issued profit warnings this week following poor second-quarter results. The message from Ericsson was more positive, although the company as is its practice gave no profit or sales forecasts.

Mr. Vestberg told financial analysts said that long-term demand for new network equipment was expected to remain strong, driven by rising purchases of smartphones. Through 2017, the number of smartphone subscriptions worldwide is expected to more than quadruple, Mr. Vestberg said, to 3 billion from 700 million at the end of June.

That will stoke demand for new LTE networks and network equipment, he said.

“We continue to stay close to our customers to monitor the impacts of macroeconomic development and political uncertainty in certain regions on their investments,” Mr. Vestberg said. “In customer conversations, it is clear that the fundamental drivers for increased data traffic are unchanged.”

In an interview, Mr. Vestberg said consumer demand for LTE handsets had started slowly, with only 2 million being sold worldwide each month in that last quarter. That compares with 5 to 10 million GSM mobile phones sold each month in India alone. The United States and South Korea are the world’s most advanced LTE markets, he said.

But other countries will soon follow, as new, faster networks come on line and more LTE handsets are sold at more affordable prices.

“The current LTE handset sales are still very low in global terms, but this is a transitional period and we are soon going to see explosive growth,” Mr. Vestberg said.

Mr. Wranne, the Swedbank analyst, said that Ericsson was better positioned because of its market leadership to capitalize on that coming growth. “The top line for Ericsson is really doing O.K. at the moment given the profit warnings from its competitors,” Mr. Wranne said. “The expectations given the current global situation weren’t that high, either.”