Technology giants ride out the downturn

Strong companies may survive in a challenging economic climate, but others are left vulnerable

The biggest IT companies are still bringing in the cash

Microsoft, Google and other large IT companies are looking well placed to ride out the worst of the downturn despite publishing results that disappointed financial analysts last week.

Microsoft’s share value dropped six per cent on publication of fourth-quarter earnings up 42 per cent year on year to $4.3bn (£2.2bn), though still short of analyst estimates. Revenue for the fiscal year ending June 2008 was $60.4bn (£30.3bn), 18 per cent up on 2007.

Despite the healthy figures, Microsoft slightly revised its revenue and profit forecasts for the coming year downwards, in anticipation of slower sales in the US.

Google’s share value dropped eight per cent after it too reported lower-than-expected earnings for the second quarter of 2008.

Net income was up to $1.25bn (£628m) from $925m (£464m) in the corresponding period last year, with revenue up 42 per cent to $5.37bn (£2.7bn). But both figures were down on the previous quarter, reflecting the usual summer slump.

However, online advertising revenue in both the US and Europe held up well, said the company.

IBM’s second-quarter net income rose to $2.77bn (£1.4bn) from $2.26bn (£1.13bn) a year earlier, with revenue up 13 percent to $26.8bn (£13.5bn), beating analyst estimates.

Intel’s income was also up 25 per cent, largely on the back of notebook PC sales where unit shipments are up but the average selling price down, said Gartner, leaving smaller vendors struggling to make a profit and vulnerable to acquisition.