Samsung Stock Falls 5% as Won Gains Strength

SEOUL, South Korea — The stock of Samsung Electronics fell more than 5 percent Thursday to its lowest point in over four months. Analysts had forecasted lower quarterly earnings due to the strong won and weaker margins in the company’s display business.

Shares fell as much as 5.1 percent on Thursday to 1.302 million won, the lowest since late August. The stock was down 4.6 percent at closing, its fifth consecutive session of decline, a trend that has wiped nearly $18 billion off the market value of Asia’s most valuable company.

Samsung, the world’s largest maker of smartphones, memory chips and televisions, is scheduled to report its October-December quarter earnings estimate on Tuesday.

The company is forecast to report a record 10.3-trillion-won operating profit in the October-December quarter, a 1 percent increase from the previous quarter, according to an average estimate of 40 analysts.

But Starmine SmartEstimate, the average of the most accurate analysts’ estimates, forecasts a 3.6 percent quarter-on-quarter drop in Samsung’s operating profit to 9.9 trillion won.

“We expect Samsung’s performance to be about 9.5 trillion won, lower than the market consensus of around 10.2 trillion won,” said Lee Seung-woo, tech analyst at I.B.K. Investment & Securities.

A stronger won is particularly bad for the profitability of Samsung’s component business as the unit mainly uses the dollar for settlement, analysts said.

The won jumped to its highest since mid-2008 on Thursday, and market participants expect more gains as data pointed toward a firm economic recovery.

Peter Yu, a BNP Paribas analyst and one of the more bearish about Samsung’s earnings, estimated the operating profit of the component business to change 4 percent for every 1 percent change in the won-dollar rate.

He also estimated Samsung’s fourth-quarter profit to fall by 14 percent from the previous quarter to 8.8 trillion won due to a stronger won, a one-off special bonus payment and weaker sales of smartphone components.

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.

Revenue Falls, but Profit Tops Forecast at I.B.M.

The company’s software delivered a strong performance, profit margins rose, and new contract signings in its major services like data analysis rose sharply — an encouraging sign of future business. But its hardware business continues to struggle.

“The results are positive compared to earnings expectations,” said A. M. Sacconaghi, an analyst at Sanford C. Bernstein. “But it’s mixed.”

I.B.M. and investors focused on the positive side. The company raised guidance for earnings per share for the year by 20 cents to “at least $16.90 a share.”

In after-hours trading, I.B.M. shares rose 2.6 percent, or more than $5. The stock closed the regular trading session up 70 cents at $194.55.

The company’s net income fell 17 percent, to $3.2 billion, or $2.91 a share, compared with nearly $3.9 billion in the year-ago period. That includes a charge of about $1 billion for trimming its work force. I.B.M. announced in April that it would take that charge this quarter and that most of the affected workers would be outside the United States.

In recent years, I.B.M. has taken annual charges that average several hundred million dollars for what it calls “work force rebalancing.” The company sheds workers in higher-cost nations and in businesses that are being trimmed, and it adds employees elsewhere, especially in India.

I.B.M. says the process reflects both financial discipline and globalization as it hires and invests in faster-growing markets. The net effect has been an expansion of its global work force to more than 430,000.

What is mainly different this time, analysts say, is that the work force charge is being taken in a single quarter rather than being spread across an entire year. The company’s operating earnings, which exclude the charge for work force cuts, rose 3 percent, to $4.3 billion, or $3.91 a share. The result was well above the average analyst estimate of $3.77 a share, according to Thomson Reuters.

Operating earnings per share rose 8 percent, reflecting fewer shares outstanding, because I.B.M. steadily buys back its own shares. Revenue fell 3 percent, to $24.9 billion, below the Wall Street forecast of $25.4 billion.

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.

Globally, the growth in technology spending has softened, as once-hot markets like China and Brazil cool and Europe remains in an economic slump. For I.B.M., the China business was soft, but Brazil did well, Mark Loughridge, I.B.M.’s chief financial officer, said in a conference call.

I.B.M. has met the challenge of economic turmoil and new waves of technology more nimbly than most of its established rivals. It moved quickly to expand in emerging markets, shift to higher-profit products and services, and cut costs.

But in the first quarter of this year, I.B.M. reported disappointing earnings, below analysts’ forecast for the first time since early 2005.

Businesses that I.B.M. has earmarked for growth are thriving. One of these is software and services for mining vast amounts of data from the Web, sensors and smartphones, to be used to find ways to increase sales or cut costs.

But the question for established companies like I.B.M. is whether newer, more profitable businesses can grow fast enough to offset the competition from emerging rivals and new technology.

A prime example is cloud computing, a fast-growing market for computing sold to businesses as a service over the Internet. The low-cost cloud model threatens traditional technology suppliers. Amazon is the early leader in the cloud business.

I.B.M. is investing in cloud computing. Last month, it announced plans to buy SoftLayer Technologies, a cloud computing company, in a deal valued at about $2 billion.

“I.B.M. is making strong plays in new technologies like cloud, but the question is whether it is moving fast enough,” said Frank Gens, chief analyst at the International Data Corporation, a research group.

In the past, I.B.M. has also aggressively pulled out of areas with declining margins, like its personal computer business, which it sold to Lenovo in 2005.

Recently, I.B.M. has talked to Lenovo about a deal for I.B.M.’s unit that sells so called industry-standard data center computers, typically powered by Intel chips, analysts say. Talks apparently broke off in May, when the two sides could not agree on a price. But Mr. Loughridge said I.B.M. was in “active discussions.” That business represents about $5 billion in sales for I.B.M., but competition is fierce.

Amazon’s Profit Falls as It Spends Heavily on Distribution Centers

On Thursday, Amazon told investors it’s still not time for a drink.

The Internet retailer reported a 37 percent decrease in profits for the first three months of the year.

That drop was expected, and it was even a bit less than some investors had forecast, which initially helped lift the company’s shares slightly in after-hours trading. The stock eventually ended up falling about 3 percent in after-hours trading.

Amazon said its net income for the first quarter, which ended March 31, fell to $82 million, or 18 cents a share, from $130 million, or 28 cents a share, a year earlier. Revenue jumped 22 percent to $16.07 billion from $13.18 billion.

While the company’s profit was better than analysts had expected, its revenue fell slightly short. Wall Street analysts expected Amazon to report earnings of 9 cents a share and revenue of $16.16 billion, according to an average of their estimates compiled by Thomson Reuters.

Amazon previously told analysts to expect its sales to grow to between $15 billion and $16.6 billion, or somewhere from 15 to 26 percent.

“It’s more of the same from Amazon,” said Colin Sebastian, an analyst at Robert W. Baird & Company.

Mr. Sebastian added that the waves of investments that Amazon was making were unlikely to abate soon. “That’s going to be a continuing trend,” he said.

The seeming indifference of many investors to Amazon’s slim profits shows how much more effective the company has been at articulating its vision of future opportunities to Wall Street than another tech favorite, Apple.

Apple, which made a profit 116 times bigger than that of Amazon last quarter, has been plagued by investor doubts about its growth prospects, driving its stock down 33 percent over the l ast year.

Amazon’s shares are up 38 percent in that period.

Jordan Rohan, an analyst at Stifel Nicolaus, said investors had been reassured by comments from Amazon management that suggested the company was not being hurt as much by weakness in European economies as another e-commerce giant, eBay. “That’s an acknowledgment that the growth outlook for Amazon remains quite robust,” he said.

Amazon is spending heavily on fulfillment centers to speed delivery of physical goods to customers. It is also investing aggressively in data centers to expand its Amazon Web Services business, which provides start-ups and big corporate clients with computers and bandwidth they can rent as needed for their online initiatives.

Then there are the consumer devices that are becoming an increasingly important part of Amazon’s plan to deliver media electronically to customers. The company’s Kindle e-readers are now a full-blown family of tablet computers, which it sells for little or no profit, with the goal of making money over the long term by selling books, movies, music and other services.

Amazon is also developing a television set-top box that it is expected to announce in the fall, a device that could give its video services a more meaningful audience in living rooms. The company recently introduced pilot episodes for 14 original comedy and children’s television shows and is soliciting viewer feedback to determine which ones will be turned into full series.

In a conference call, Tom Szkutak, Amazon’s chief financial officer, repeated an oft-stated Amazon motto about its priorities. “We believe putting customers first is the only way to create lasting value for shareholders,” he said.

A Million Users Desert BlackBerry, and Revenue Falls 48%

It reported other bad news as well, a month before introducing its new BlackBerry 10 phones to the public. Revenue fell 48 percent in the company’s fiscal third quarter, ended Dec. 1, to $2.7 billion from $5.2 billion a year earlier.

After a favorable tax gain, RIM reported net income of $9 million, or 2 cents a share. A year ago during the same period, RIM earned $265 million, or 51 cents a share. The company said that using nonstandard accounting methods to adjust for the tax gain and other pretax charges led to an adjusted net loss of $114 million for the third quarter, or 22 cents per share.

Analysts had expected a larger loss of 35 cents a share, according to a survey by Thomson Reuters. Nevertheless, RIM’s shares fell about 9 percent in after-hours trading. Before RIM’s announcement, shares closed at $14.12, up for the day by 3.6 percent.

The company has pinned all its hopes on the BlackBerry 10 to win back customers who may have defected to iPhones or phones using Google’s Android operating system. RIM said 79 million customers were using BlackBerry devices.

“We believe the company has stabilized and will turn the corner in the next year,” Thorsten Heins, the chief executive, said in a conference call with analysts. “We are realistic about our competitors, but we know that customers in this industry demand and respond to innovation.”

Until now, RIM had been able to offset the sharp drop in the BlackBerry’s popularity in its traditional markets, particularly the United States, through increased sales to users in developing countries. Because every BlackBerry user generates high-margin monthly fees from carriers for RIM, the last quarter’s loss of subscribers is more than just a symbolic setback.

In the conference call Mr. Heins indicated that RIM had been reducing those fees, which account for 36 percent of RIM’s revenue, in a bid to keep BlackBerry’s current product offerings alive. And in an announcement that seemed to concern some analysts on the call, Mr. Heins said that the new BlackBerry 10 phones would substantially revamp how RIM set service fees.

With BlackBerry 10, Mr. Heins said, corporate and government users will be able to pick and choose what services they purchase from RIM, a step that he said could mean that some of them would no longer generate any user fees. The company was unclear about what fees BlackBerry 10s sold to consumers would produce. Last month Mr. Heins said that consumer BlackBerry 10 models would no longer benefit from RIM’s special Web compression technology, the chief service provided to consumers by RIM.

RIM, which has no debt, pleasantly surprised analysts by increasing its cash on hand by $600 million, to $2.9 billion. The company was vague about how it achieved that beyond saying that the newfound cash came from “working capital conversion.” In the past, several analysts have speculated that the company has mainly become better at collecting its outstanding bills.

Mr. Heins said that the introduction of BlackBerry 10, however, would bring an end to the company’s cash hoarding. RIM, he said, will dig into its cash reserves during the quarter to stockpile BlackBerry 10 phones in advance of their release and to finance advertising and other marketing campaigns for the devices.

Nevertheless, Mr. Heins predicted that RIM would still hold more cash at the end of its fiscal year than the $2.1 billion it had on hand at its beginning.

RIM shipped 6.9 million current-model BlackBerry phones during the quarter and 255,000 of its BlackBerry PlayBook tablets. During the call, company officials indicated that those products were being heavily discounted.

Hurt by Rivals From Asia, Dell Profit Falls 47%

The company, once the world’s top PC maker and a pioneer in computer supply chain management, is struggling to defend its market share against Asian rivals like Lenovo. It is trying to bolster growth by focusing on products and services to corporations.

The company, founded by its chief executive, Michael Dell, said that it saw “the challenging global macroeconomic environment continuing in the fourth quarter.”

Net income was $475 million, or 27 cents a share, compared with $893 million, or 49 cents a share, in the period a year earlier. Excluding certain items, it earned 39 cents a share, compared with an average forecast of 40 cents.

Revenue fell 11 percent, to $13.7 billion, slightly less than the average analyst estimate of $13.89 billion, according to Thomson Reuters.

Dell’s chief financial officer, Brian T. Gladden, said in an interview that corporate customers continued to postpone technology spending.

“It’s not clear what’s going to cause them to increase their spending in the short term, given the uncertainty in the economy,” he said.

Dell’s enterprise solutions revenue rose 3 percent to $4.8 billion, while server and networking revenue climbed 11 percent. In contrast, consumer revenue plummeted 23 percent to $2.5 billion, underscoring the plight of the broader PC market. And sales to large corporations declined 8 percent to $4.2 billion.

The consumer market is improving with the introduction of the Windows 8 operating system from Microsoft, which has been designed with touch-screen devices and Internet-based computing in mind, Mr. Gladden said.

Part of the spending weakness among corporate customers comes from worry over early next year, when trillions of dollars in tax increases and automatic spending cuts will begin to go into force unless lawmakers agree on legislation to reduce the budget deficit, Mr. Gladden said.

The cuts could take a toll on consumer and government spending and cause the economy to stall.

“I would tell you that the behavior we are seeing from our customers today is actually driven by that uncertainty,” Mr. Gladden said. “It’s not like it’s all going to happen overnight. It’s affecting our business today.”

Dell is ensuring that it has access to cash in case there is no Congressional action.

“I would say there are several things we are doing from a planning standpoint,” Mr. Gladden said, “to ensure that we are in a position to have appropriate access to liquidity.” He said Dell was making sure it would have access to lines of credit and commercial paper.

Dell shares fell around 2 percent in late trading from their close of $9.56. The shares initially rose after the release of the results.

Microsoft Profit Falls as PC Sales Shrink

The software company, based in Redmond, Wash., said net income for its fiscal first quarter which ended Sept. 30, dropped 22 percent to $4.47 billion, or 53 cents a share, compared to $5.74 billion, or 68 cents a share, for the year-earlier period.

Revenue was $16 billion, down 8 percent from $17.37 billion a year before. Microsoft deferred the recognition of $1.36 billion in revenue in the quarter because of software upgrade offers and the sale of copies of Windows 8 before its official release. But even if that had been included in the quarter, Microsoft’s revenue would have been flat.

Analysts surveyed by Thomson Reuters expected Microsoft to report earnings of 56 cents a share and revenue of $16.42 billion. Microsoft’s shares fell more than 1 percent in after-hours trading.

The results reflected the grim market for personal computers, the technology from which Microsoft still derives much of its sales and profit in one way or another. Smartphones, tablets and other devices have been taking in more and more money that might have once been spent on PCs. The soft economy has not helped PC sales either.

Signs of the personal computer slump are everywhere. The research firm IDC recently reported that PC shipments declined 8.6 percent globally in the last quarter, much worse than it had expected. Intel, the primary maker of chips that power PCs, said this week that its sales and profit fell because of weakness in the market.

Microsoft expects Windows 8 to help bolster the overall PC market, though Peter Klein, Microsoft’s chief financial officer, declined in an interview Thursday to say how significant it would be. The earliest adopters of new versions of Microsoft’s operating systems tend to be consumers rather than businesses, a pattern Mr. Klein said he expected to continue with Windows 8.

Microsoft said revenue from its core Windows operating system declined 33 percent to $3.24 billion,though it declined 9 percent if Microsoft had not deferred revenue related to Windows 8. Even the Microsoft division that includes its Office applications, which also tends to benefit from sales of new PCs, had a decline in revenue — 2 percent in the quarter to $5.5 billion.

Mr. Klein also said Microsoft had strong sales to corporate customers, many of whom tend to buy software through big multiyear contracts. But Mr. Klein said the company’s results suffered because of “challenges in the PC environment,” especially the consumer market. During the first two months of the quarter, he said, retailers cleared out PCs running older versions of Windows in anticipation of new Windows 8 machines, which they began ordering late in the quarter.

One reason Microsoft has suffered is that it has had trouble capitalizing on the growth in mobile devices. Its Windows Phone operating system has made little progress in halting the momentum of Apple’s iPhone and devices running Google’s Android software.

The huge success of the iPad has started to eat into sales of low-end laptops, though no one in the industry is sure by precisely how much. The planned release of Windows 8 on Oct. 26 will be Microsoft’s most serious effort yet to take part in the surge in interest among consumers and businesses in tablet computers.

Microsoft has radically changed the operating system to take better advantage of touch-screen devices, though it is also aimed at more conventional PCs operated with a keyboard and mouse. With Windows 8, Microsoft is also preparing to release a tablet of its own design, called Surface, that will go on sale for a starting price of $500 on Oct. 26. (Surface will use a variation of the Windows 8 operating system called Windows RT.)

Some analysts say that they believe fears about Microsoft’s deteriorating future are overblown, and that the PC market is still very large. “People want to make it like the last PC was shipped,” said Colin Gillis, an analyst at BGC Partners. “Yes, it’s in decline, but it’s not dead.”

Most of Microsoft’s other divisions experienced declines or little growth in the quarter.

The revenue of the company’s entertainment and devices division, which includes one of the company’s biggest consumer hits, the Xbox 360, fell 1 percent to $1.95 billion, as the console showed further signs of age.

Apple's Retail Expansion Falls Short in China

SHANGHAI — Apple has more retail stores in Pennsylvania than in all of China — where it earns a fifth of its revenue — and a slow pace of expansion may cost the firm more than just sales.

Apple’s six stores in China are routinely packed, and customers often wait in long lines for iPhone repairs. Scalpers are known to camp out to be first in line for new products, which they then resell for a tidy profit.

The California company is notoriously fastidious when it comes to its flagship stores, and has said it is taking its time in China to ensure that it secures the right locations. But its retail expansion has fallen well short of its own goals.

In 2010, Ron Johnson, then Apple’s retail head, forecast that the company would have 25 stores in China by this year.

“There’s certainly more demand than Apple can serve with their store footprint currently,” said Torsten Stocker, a partner at Monitor Group, a business strategy firm.

The clamor for Apple products has spawned a bustling gray market where smuggled goods are peddled by unauthorized resellers. Copycat Apple stores have popped up in smaller mainland Chinese cities.

The Apple frenzy will only intensify now that the company has agreed to pay Proview Technology $60 million to settle a lawsuit over the iPad trademark, freeing it to sell its latest tablet computer in mainland China.

Apple has two retail stores in Beijing, three in Shanghai, and one in Hong Kong. Chinese government officials said last month that the company is looking to open two more in the major cities of Chengdu and Shenzhen.

In Pennsylvania, a state with a population of 12.7 million, Apple has eight stores, including three in the city of Pittsburgh alone. The population of China is 1.3 billion.

Apple declined to comment for this story.

The shortage of retail stores and authorized resellers leaves ample room for unlicensed resellers to move in. Bad consumer experiences at unauthorized shops are common, and they run the risk of eventually eroding confidence in Apple’s products, said David Wolf, chief executive of the Beijing-based consulting firm Wolf Group Asia.

If Apple does not expand its network of stores and authorized resellers, it “loses not only near-term sales, it also endangers the sustainability of its success in China,” he said.

Apple products can also be bought online in China, but many consumers prefer to buy at the store after testing the product.

Apple’s flagship stores in China are packed with people tinkering with the company’s latest gadgets, even on weekdays. Last October, Apple’s chief financial officer, Peter Oppenheimer, said the China branches were the highest trafficked stores, and among those with the highest revenue, for the company.

Demand for new Apple products is so high that scalpers lined up outside a Beijing store this year for the latest iPhone, only to pelt the store with eggs after Apple decided against selling the phone there over security concerns.

Apple competes with Samsung as well as the homegrown Chinese technology firms Huawei and ZTE in China’s fast-growing smartphone sector.

The pace of retail expansion may not be dictated entirely by Apple. Red tape often hampers foreign companies’ expansion plans in China, and that may be holding back growth.

“There are complications around opening stores in China that you don’t get in Western countries,” said Andrew Milroy, vice president of information and communications technology research for the Asia-Pacific region at Frost & Sullivan in Singapore.