June 18, 2024

I.B.M. Exploring New Feats for Watson

That is just one of the questions that I.B.M. is asking as it tries to expand its artificial intelligence technology and turn Watson into something that actually makes commercial sense.

The company is betting that it can build a big business by taking the Watson technology into new fields. The uses it will be showing off to Wall Street analysts at a gathering in the company’s Almaden Research Center in San Jose, Calif., on Thursday include helping to develop drugs, predicting when industrial machines need maintenance and even coming up with novel recipes for tasty foods. In health care, Watson is training to become a diagnostic assistant at a few medical centers, including the Cleveland Clinic.

The new Watson projects — some on the cusp of commercialization, others still research initiatives — are at the leading edge of a much larger business for I.B.M. and other technology companies. That market involves helping corporations, government agencies and science laboratories find useful insights in a rising flood of data from many sources — Web pages, social network messages, sensor signals, medical images, patent filings, location data from cellphones and others.

Advances in several computing technologies have opened this opportunity and market, now called Big Data, and a key one is the software techniques of artificial intelligence like machine learning.

I.B.M. has been building this business for years with acquisitions and internal investment. Today, the company says it is doing Big Data and analytics work with more than 10,000 customers worldwide. Its work force includes 9,000 business analytics consultants and 400 mathematicians.

I.B.M. forecasts that its revenue from Big Data work will reach $16 billion by 2015. Company executives compare the meeting in San Jose to one in 2006, when Samuel J. Palmisano, then chief executive, summoned investment analysts to I.B.M.’s offices in India to showcase the surging business in developing markets, which has proved to be an engine of growth for the company.

I.B.M. faces plenty of competitors in the Big Data market, ranging from start-ups to major companies, including Microsoft, Oracle, SAP and the SAS Institute. These companies, like I.B.M., are employing the data-mining technology to trim costs, design new products and find sales opportunities in banking, retailing, manufacturing, health care and other industries.

Yet the Watson initiatives, analysts say, represent pioneering work. With some of those applications, like suggesting innovative recipes, Watson is starting to move beyond producing “Jeopardy” style answers to investigating the edges of human knowledge to guide discovery.

“That’s not something we thought of when we started with Watson,” said John E. Kelly III, I.B.M.’s senior vice president for research.

I.B.M.’s Watson projects are not yet big money makers. But the projects, according to Frank Gens, chief analyst for IDC, make the case that I.B.M. has the advanced technology and deep industry expertise to do things other technology suppliers cannot, which should be a high-margin business and give I.B.M. an edge as a strategic partner with major customers. And the new Watson offerings, he said, are services that future users might be able to tap into through a smartphone or tablet.

That could significantly broaden the market for Watson, Mr. Gens said, as well as ward off potential competition if question-answering technology from consumer offerings, like Apple’s Siri and Google, improve.

“It will take years for these consumerized technologies to compete with Watson, but that day could certainly come,” Mr. Gens said.

John Baldoni, senior vice president for technology and science at GlaxoSmithKline, got in touch with I.B.M. shortly after watching Watson’s “Jeopardy” triumph. He was struck that Watson frequently had the right answer, he said, “but what really impressed me was that it so quickly sifted out so many wrong answers.”

Article source: http://www.nytimes.com/2013/02/28/technology/ibm-exploring-new-feats-for-watson.html?partner=rss&emc=rss

KFC Parent Suffers After China Scandal

LOS ANGELES — KFC’s parent, Yum Brands, has warned that it expects 2013 earnings to shrink rather than grow as it struggles to manage a food safety scare in China and expects no return to growth in restaurant sales there until the fourth quarter.

Shares of Yum, a fast-food chain operator based in Louisville, Kentucky, fell 5.6 percent in after-hours trading Monday as Wall Street analysts and investors received the disappointing news. The company has been widely seen as a model for how a foreign company can do business in the complex Chinese market.

“This is going to take all the experts they have in public relations to stem the tide,” said Jack Russo, an analyst at the investment firm Edward Jones. “I don’t think anyone saw this coming.”

Overall fourth-quarter net income at Yum, which also operates the Pizza Hut and Taco Bell chains, fell to $337 million, or 72 cents per share, from $356 million, or 75 cents per share, in the same period a year earlier. Excluding special items, Yum had a profit of 83 cents per share. That topped analysts’ average estimate by a penny, according to Thomson Reuters I/B/E/S. Total revenue rose to $4.15 billion from $4.11 billion.

Yum reported a 6 percent drop in fourth-quarter sales at established restaurants in China because of “adverse publicity” regarding chemical residue found in some of its chicken supply.

Its China business continued to suffer in January, when same-store sales — revenue from stores open for at least a year — dropped 37 percent, including a 41 percent decline for KFC and a 15 percent decline for Pizza Hut Casual Dining.

Yum said the January data had probably affected by the timing of the Lunar New Year, which fell in January last year. The weeklong holiday period, which is in February this year, typically increases sales at restaurants and other tourist-related sectors.

Still, Yum expects same-store sales in China to be down 25 percent for its financial first quarter for China operations, which includes only the full months of January and February. It said KFC same-store sales in China should perk up by the fourth quarter.

As a result, Yum forecast a “mid-single-digit” percentage decline in earnings per share for 2013. Yum had forecast growth this year in earnings per share of at least 10 percent, and analysts polled by Thomson Reuters I/B/E/S had expected the same.

Yum has nearly 5,300 restaurants in China, mostly KFC locations, and the country accounts for more half its sales and 40 percent of total operating profit. Its strong reputation for high food quality helped it grow briskly in a country that has been rocked by serious and persistent food safety scandals.

Yum’s China sales first took a hit in mid-December, when government food safety agencies began investigating the company’s supply chain. The investigations were prompted by a report on China Central Television that found that two of Yum’s suppliers in China had purchased chickens from farmers who used excessive levels of antibiotics in their animals. Yum stopped using one of those suppliers and cut purchases from a problematic plant used by the other.

Although the company was not fined by the Chinese food safety authorities, it has suffered a widespread backlash in the mainstream news media and on microblogs.

A concern for Yum is that its other branded stores in China — including Pizza Hut, Little Sheep hot pot eateries and East Dawning Chinese fast food — may be tarnished by the KFC scandal. In early January, Yum apologized to customers in China over its handling of the food scare. On Monday, it said it would begin an aggressive marketing campaign after the Lunar New Year, which starts Feb. 10, to restore KFC’s brand image.

The company would do well to shake off all corporate “hubris” and fall on its sword, said the branding expert Robert Passikoff, president of Brand Keys. “If your same-store sales are down by more than one-third, something’s not working,” Mr. Passikoff said.

Article source: http://www.nytimes.com/2013/02/06/business/global/kfc-parent-suffers-after-china-scandal.html?partner=rss&emc=rss

AT&T Fourth-Quarter Earnings Hurt by Pensions and Storm

Over the holiday season, ATT sold a record number of smartphones. But its quarterly earnings took a hit from pension costs and Hurricane Sandy.

Despite the setbacks, ATT’s business had a strong fourth quarter. It sold more smartphones than its main competitor, Verizon Wireless. It also added many new contract subscribers and increased the revenue that it gets from mobile data, the fees that people pay to use the Internet on its network.

“We had an excellent 2012,” said Randall Stephenson, ATT’s chief executive, in a statement. “Looking ahead,” he added, “our key growth platforms — mobile data, U-verse and strategic business services — all have good momentum with a lot of headroom.”

On Thursday, ATT reported a loss in the fourth quarter of $3.9 billion, or 68 cents a share, up from a loss of $6.7 billion, or $1.12 a share, from the same quarter a year earlier.

The company said revenue was essentially flat at $32.6 billion.

Its adjusted per-share earnings were 44 cents a share, excluding pension costs, the impact of Hurricane Sandy and the sale of its advertising units. Wall Street analysts had expected 45 cents a share on earnings of $32.2 billion, according to Thomson Reuters.

The company, based in Dallas, said that it sold 10.2 million smartphones over the quarter, the most ever sold by any American carrier. A majority of those smartphones were iPhones: ATT sold 8.6 million iPhones, in contrast to Verizon Wireless’s 6.2 million iPhones.

ATT did not, however, beat Verizon in an important metric for carriers: the number of new contract subscribers, who are the most valuable type of customer. ATT gained 780,000 new contract subscribers over the quarter, compared with Verizon’s 2.1 million. In the wireless industry, subscription growth is crucial as carriers joust for the few remaining people who do not already own cellphones.

The iPhone, the most popular smartphone in the world, has been an important weapon for carriers to get new subscribers. Although ATT still leads as the nation’s top seller of iPhones, Verizon has been increasing its iPhone sales every quarter, and it is getting close to catching up, said Chetan Sharma, an independent mobile analyst.

“There’s always been this attachment in consumers’ minds that ATT is the brand for iPhone,” Mr. Sharma said. “I think that’s starting to even out in the marketplace.”

Similar to Verizon, ATT last summer started offering shared data plans, which allow customers to share a single pool of data across multiple devices, including smartphones, tablets and computers. It said on the earnings call that it already had 6.6 million subscribers on these plans, about a quarter of whom are opting for plans with at least 10 gigabytes. Thanks in part to these new shared data plans, revenue from mobile data grew 14.7 percent over the quarter, to $6.8 billion, up from $5.9 billion last year.

ATT’s success with shared data plans is good news for the company, because they help to pry customers off flat-rate, unlimited data plans so that they eventually pay more for data, said Jan Dawson, an analyst with Ovum, a research firm. Indeed, ATT said more than 15 percent of shared data plan customers were switching from unlimited data plans.

ATT also saw a rise in customers for U-verse, its digital phone, television and high-speed Internet service for households. It added 609,000 U-verse customers over the quarter, bringing the total number of subscribers to about 7.7 million.

The carrier has big plans this year to attract more customers. It is in the process of a major wireless network expansion. It said late last year that it would invest an extra $14 billion to expand its wireless and broadband services through 2015. It expects that its fourth-generation network technology, called LTE, will cover 300 million people by the end of next year.

Beyond making upgrades to its wireless network, ATT has plans to offer new services that might create new revenue streams. In March, it will begin selling its new wireless home security system, Digital Life, which will allow people to use tablets or phones to monitor their homes from afar. If a burglar trips a motion sensor in the house, for example, a user can receive a text message, then call the police. Ralph de la Vega, chief executive of ATT Mobility, has said that he believes home security will be a big opportunity to increase revenue, because only 20 percent of American homes have security systems, leaving millions of homeowners as potential buyers.

ATT’s Mr. Stephenson said he was excited about the “vibrant options” for phones set to arrive in the coming year, including devices with Research in Motion’s new BlackBerry 10 system.

“I’m very optimistic about BlackBerry 10,” Mr. Stephenson said. “I hope that it’s as good as it appears to be.”

This article has been revised to reflect the following correction:

Correction: January 24, 2013

An earlier version of this article published online misstated the expectation of Wall Street analysts for ATT’s quarterly per-share earnings. It was 45 cents, not 48 cents.

Article source: http://www.nytimes.com/2013/01/25/technology/pensions-and-storm-hurt-att-earnings.html?partner=rss&emc=rss

Bits Blog: H.P.’s Chief Says a Revival Is Unlikely Before 2016

Hewlett-Packard needs four more years “to have confidence in itself,” says Meg Whitman, the company’s chief executive.Peter DaSilva for The New York Times Hewlett-Packard needs four more years “to have confidence in itself,” says Meg Whitman, the company’s chief executive.

7:45 p.m. | Updated

SAN FRANCISCO — Meg Whitman, Hewlett-Packard’s chief executive, beat up her company on Wednesday.

Ms. Whitman told a meeting of Wall Street analysts that they should expect sharply lower revenue and profits. She also told them not to expect the company to fully right itself before 2016. “We have much more work to do,” she said.

While the news was not completely unexpected, the vehemence of Ms. Whitman’s message drove shareholders to the exits. H.P.’s stock dropped about 8 percent while she was speaking and ended the day at $14.91 a share, down nearly 13 percent on unusually high trading volume. The stock had not been that low in a decade.

The drubbing was probably what Ms. Whitman, the former chief  of eBay, had in mind. Executives involved in her presentation, who requested anonymity because they were not authorized to speak publicly, said she wanted to get as much bad news as possible out at once, so the company could focus on rebuilding rather than having to explain one disappointing quarter after another.

Analysts, while somewhat taken aback by the depth of H.P.’s problems, thought Ms. Whitman had made the right move in putting them out in the open. “In an era where C.E.O.’s watch every word they say, it’s refreshing to see complete candor. H.P. is a mess,” said Patrick Moorhead, president of Moor Insights and Strategy, who attended the meeting. “It will take five to 10 years to fully take care of this, just the way it took I.B.M. to remake itself. Wall Street doesn’t like anything longer than a one- to three-year horizon. It’s too much risk for them.”

For now, Hewlett-Packard is still the world’s leader in sales of personal computers, printers and computer servers, with revenue last year of $127 billion, but it forecast revenue next year of 11 percent to 13 percent below fiscal 2012 levels. Analysts had assumed it would only decrease about 1 percent.

Operating profit margins, which have been about 7 percent, could evaporate completely or, at best, shrink to about 3 percent, the company said. Earnings per share were expected to fall by about 16 percent from what analysts had projected.

The meeting was probably also Ms. Whitman’s last chance to blame previous leaders for any of H.P.’s problems. Since 1999, H.P. has had three other chief executives, each with a different vision and operating strategy. All left under duress, leaving a company that leads the industry in revenue but is internally chaotic.

Those problems now belong to Ms. Whitman, who took over almost 13 months ago. She has replaced a number of top executives, and has initiated changes to product development and the company’s global marketing and branding. These changes will start to appear next year, but she is clearly impatient to fix more things faster.

“Operational excellence should have become a way of life,” she told analysts, but instead, H.P. is hampered by poor internal communications and management systems.

“I’ve learned at H.P. that you do not get what you expect, you get what you inspect,” she said.

Investors may also have been troubled by some of Ms. Whitman’s strategy. She intends to shrink the number of products H.P. makes, and to move out of businesses that are in decline.

For example, she said the company made more than 2,100 varieties of laser printers, causing excess costs in everything from parts to packaging requirements.

Printer cartridges were once responsible for over 90 percent of H.P.’s profits, but they face increasing competition from lower-price suppliers. Consumers are also using their printers less because many of the things they used to print routinely, like maps and boarding passes, are on smartphones.

H.P. is reversing its printer strategy in the developing world by selling cheaper cartridges and more expensive printers. In developed economies like the United States, it wants to move to a subscription model in which business customers pay an annual fee, and their Internet-connected printers get new cartridges when the system detects they are low on ink.

Investors could be skittish about plans like these, simply because they are not yet proved. Indeed, H.P. shares fell further as Ms. Whitman’s lieutenants laid out the new strategies.

In other areas, there are questions about whether H.P.’s new products can replace, or even surpass, the revenue lost from declining businesses. Cloud computing systems, which consist of thousands of servers sold as a unit, are meant for an increasingly important market. Cloud computing is more efficient than existing systems, however, which means it is likely to lower the overall demand for large numbers of servers.

For all the difficulties she identified, Ms. Whitman may have actually cloaked other long-term problems. The new company she foresees, which she projected would exist by 2016 or so, would probably increase revenue no faster than the overall growth of the global economy. Profit margins would improve from better management, but not necessarily from technological innovations.

The new H.P. would most likely employ fewer workers, as well. Ms. Whitman has already announced a total of 29,000 layoffs. The company had 349,600 employees at the end of last October. She said future profitability would depend in part on more automation, indicating even more job cuts.

While Ms. Whitman said H.P. must focus more closely on its top 14 markets and its main  competitors, a continued low stock price may present other worries. The tech industry is facing a transition from traditional PCs and servers to mobile devices and cloud computing, and is consolidating. H.P. could become a target either for corporate raiders or for another tech company in a hostile takeover.

Article source: http://bits.blogs.nytimes.com/2012/10/03/h-p-stock-drops-as-meg-whitman-speaks/?partner=rss&emc=rss

I.B.M.’s Profit Beats Forecast

The I.B.M. formula continues to pay off.

Profits, more than sales growth, have been the big technology company’s focus in recent years. And predictably, I.B.M. delivered a steady performance in the fourth quarter of 2011, reporting profits that easily surpassed Wall Street forecasts. Sales were just below analysts’ estimates, weighed down by a slowdown in mainframe sales, compared with the previous year when new models were introduced.

The company reported that its net income rose 4 percent, to $5.5 billion. But its operating earnings per share rose 11 percent to $4.71 a share. There were far fewer outstanding shares than a year earlier after I.B.M. spent billions to buy back shares in 2011.

The quarterly result was well above the $4.62-a-share average estimate of Wall Street analysts, as compiled by Thomson Reuters.

“The quarter was typical I.B.M.,” said A. M. Sacconaghi, an analyst at Sanford C. Bernstein Company.

I.B.M.’s revenue rose 2 percent to $29.5 billion, but it fell short of analysts’ forecast of $29.7 billion. Analysts expect that the faltering economy in Europe and the stronger dollar will curb reported sales for major technology companies like I.B.M., who derive the majority of their revenue from abroad.

Virginia M. Rometty, I.B.M.’s chief executive, called the quarterly performance a “strong” finish to a year of record earnings per share, revenue and profit.

I.B.M. also expressed its confidence in the current year, saying it anticipated earnings for 2012 of “at least $14.85 a share.” That is above the Wall Street consensus of $14.76 a share, according to FactSet Research.

In after-hours trading, I.B.M. shares rose $4.50 a share, or 2.5 percent, to reach $185.05.

I.B.M. is the largest single supplier of information technology to corporations worldwide, selling more than $100 billion a year in services, software and hardware to businesses and governments. As a result, the company’s results are closely watched as a barometer of corporate spending and confidence. In that respect, analysts say, the company’s performance is reassuring.

Recent reports suggest that corporate technology buyers will restrain spending this year, given the uncertain global economy. A survey of more than 2,300 chief information officers in 45 countries, conducted by the research firm Gartner and released on Wednesday, found that technology budgets would be flat this year and would decline in North America and Europe. But I.B.M., analysts note, has become more resilient to swings in economic cycles than most corporate technology suppliers.

In recent years, I.B.M. has shed more cyclical hardware businesses like personal computer and disk drives, while stepping up its investment in more stable services and software businesses. It has been aggressive in tapping fast-growing markets abroad, while developing new businesses, like analytics software that helps companies sift through data for insights about how to cut costs and help sales.

“I.B.M is uniquely positioned to sell higher-value software and services,” said Ben Reitzes, an analyst at Barclays Capital.

The company got strong performances from businesses its top management had singled out as particularly important to its future. Revenue from fast-growing markets abroad including China, India and Brazil, and dozens of smaller ones, increased 16 percent. These designated growth markets now account for 22 percent of I.B.M. business, Mark Loughridge, the chief financial officer, said in conference call. Its “smarter planet” business — which combines research, specialized skills and sophisticated technology — grew by 47 percent. The initiative, which was started in 2008, has more than 2,000 projects, like creating more efficient systems for utility grids, food distribution, water conservation and health care.

But the hardware business held back growth. In the year-earlier quarter, hardware sales surged because new models of I.B.M. mainframes had recently been introduced. In the fourth quarter of 2011, without a new model, mainframe revenue dropped 31 percent from the previous year.

Software revenue grew 9 percent to $7.6 billion in the quarter, and the big services business added 3 percent to $10.5 billion. The growth in services revenue was restrained by Japan, where I.B.M. has a large services business and the economy is weak.

Still, profit margins in the services business are rising, and new contracts signed — a signal of future revenue — were $20.4 billion, above analysts’ estimates.

“We have a good hand as we enter 2012,” Mr. Loughridge said.

This article has been revised to reflect the following correction:

Correction: January 19, 2012

An earlier headline and summary on this article misstated I.B.M.’s sales trend for the quarter. Revenue was up, not down, by 2 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=2a8a0f19571ba65b9635ff8b7b3a5429

Meg Whitman Is Named Hewlett-Packard Chief

The upheaval at H.P. came after several weeks of mounting concerns among board members, senior executives and investors about how the former chief, Léo Apotheker, had handled a major strategy shift at the company announced last month, according to interviews with several people briefed on the board’s discussions.

While the board still endorses the strategy change — which includes a possible spinoff of its personal computer business, the closing of a line of mobile devices and the $11.7 billion acquisition of the software maker Autonomy — its members felt that Mr. Apotheker had bungled communicating the plans to H.P. employees and outsiders.

“It’s not about the strategy, it’s about the guy,” said one of the people with knowledge of the board’s discussions, who was not authorized to speak publicly.

In an interview, Ms. Whitman, who became a member of the board this year, said the process that had led to Mr. Apotheker’s ouster took place over about three months, and came to a head in late August. Once she was aware that she would be a candidate to succeed him, she said, she recused herself from the selection of a successor.

Talking about why she chose to accept the role, she said, “This is a chance to help turn around an American icon,” adding that “we’ve got our hands full.”

In an earlier conference call with Wall Street analysts, Ray Lane, the company’s executive chairman, was asked whether hiring Ms. Whitman had been “hasty and premature.” He replied that the board had revisited the results of the search done before hiring Mr. Apotheker, but wanted “to reach inside” H.P. Despite her brief tenure solely as a board member, he said Ms. Whitman was viewed as an insider.

In one change from Mr. Apotheker’s plans, Ms. Whitman told investors in the conference call that H.P. would reach a decision about the fate of its PC business by the end of the year, rather than next year.

She said in the interview that H.P. would remain committed to the sale of computer hardware, drawing a distinction between herself and Mr. Apotheker. “He was a software executive who thought there was a faster-growing, higher-margin business in software,” she said, but “it will not transform the company.”

H.P. did not reveal any details about Mr. Apotheker’s exit package, though it is expected to in the coming days. After analyzing Mr. Apotheker’s contract, James F. Reda Associates, a compensation consulting firm, estimated he could get as much as $38 million in total compensation, including severance, salary and other items, from his 11 months working at H.P.

A hint of trouble for Mr. Apotheker surfaced two weeks ago, when Dominique Senequier, an H.P. director and chief executive of a private equity firm, notified the company that she planned to leave the board early next year, a fact disclosed in a company filing with securities regulators.

The decision by Ms. Senequier, who was known to be close to Mr. Apotheker, was prompted by a concern about Mr. Apotheker’s fate at the company, according to the person familiar with the board’s discussions.

Dissatisfaction with Mr. Apotheker had been building since he was named to lead the company less than a year ago, but the concerns boiled over beginning on Aug. 18, said Mr. Lane.

That was when H.P. hastily announced that it was exploring a sale or spinoff of its PC business into a separate company, after portions of the news became public earlier in the day, and disappointing quarterly earnings.

The changes caught many H.P. executives off-guard; Todd Bradley, the executive in charge of its PC business, received less than 24 hours’ notice, according to a person close to Mr. Bradley.

The uncertainty about the future of the PC business also created uneasiness among the company’s big corporate customers, causing concern among H.P.’s board that it could contribute to weakness in its PC sales.

Quentin Hardy and Eric Dash contributed reporting.

This article has been revised to reflect the following correction:

Correction: September 22, 2011

An earlier version of the capsule summary for this article misstated Ms. Whitman’s given name as Angela. As the article and picture caption correctly note, it is Meg.

Article source: http://feeds.nytimes.com/click.phdo?i=02d43fc8288923b272c93a515f4ad200

Consumer Inflation Higher Than Expected

WASHINGTON — The inflation rate in the United States decelerated slightly in August as gasoline prices rose at a more modest pace and the cost of buying a new car held flat, the Labor Department said on Thursday. But rate was still higher than analysts’ forecasts.

At the same time, the department said the number of Americans filing new claims for jobless benefits rose unexpectedly last week in a sign concerns about a weak economy were sapping an already beleaguered labor market.

The Labor Department said its Consumer Price Index increased 0.4 percent last month, after rising 0.5 percent in July. The reading was higher than the 0.2 percent rise expected, with food prices posting their biggest gain since March.

Gasoline prices climbed 1.9 percent after jumping 4.7 percent the prior month. Food prices rose 0.5 percent after increasing 0.4 percent in July.

Core C.P.I. — which excludes food and energy — rose 0.2 percent after rising at the same rate in July. Last month’s gain was in line with economists’ expectations.

In the 12 months that ended in August, core C.P.I. increased 2.0 percent — the biggest rise since November 2008. This measure has rebounded from a record low of 0.6 percent in October 2010.

Overall consumer prices rose 3.8 percent year-over-year, the most since September 2008.

Applications for unemployment benefits climbed to 428,000 in the week ended Sept. 10 from an upwardly revised 417,000 the prior week, the Labor Department said.

It was the second straight week in which claims rose. Wall Street analysts had been looking for a dip to 410,000.

Excluding one week in early August, claims have held above 400,000 since early April. The four-week moving average of claims, which smoothes out volatility, rose to 419,500 from 415,500 the prior week.

Continuing claims eased to 3.726 million in the week ending Sept. 3 from 3.738 million the previous week. The number of total recipients on benefit rolls was 7.144 million.

U.S. employment growth ground to a halt in August, with zero net job creation raising fears of a new recession and putting pressure on the Federal Reserve to ease monetary policy further at 536870913 543782003

Article source: http://feeds.nytimes.com/click.phdo?i=28597a608b9aabed9bcc605d4766b5fd

Profit Slides on Soft Sales, but Cisco Stays Upbeat

SAN FRANCISCO — Cisco Systems managed to encourage investors Wednesday despite sliding quarterly profits and flat revenue growth, prompting a nearly 7 percent run-up in its shares during after-hours trading.

John T. Chambers, chief executive of Cisco, who is trying to restructure and refocus the company after a year of stumbles attributed partly to slow decision-making, has said it would be some time before his efforts produced results.

Cisco has long been considered a bellwether for technology spending, but its internal problems have made it a less reliable stand-in for the broader technology industry. Cisco makes routers and switches used by corporations and government agencies to operate data centers and telecommunications networks.

But spending by the public sector, which makes up a fifth of Cisco’s overall sales, continues to decline. Spending by government agencies, public universities and hospitals fell 4 percent in its fourth quarter, the company said.

Mr. Chambers said, “You are seeing people making tough decisions about what to cut.”

Cisco reported that its net income in the fourth quarter that ended July 30 fell 36.3 percent to $1.2 billion, or 22 cents a share, from $1.9 billion, or 33 cents, in the same quarter a year ago.

The company said revenue climbed 3.3 percent to $11.2 billion, from $10.8 billion.

The adjusted income of 40 cents was slightly above the expectations of Wall Street analysts. They had expected 38 cents a share and revenue of $10.98 billion on that basis, according to a survey of analysts by Thomson Reuters.

The lack of more bad news was enough to buoy the company’s shares. Jason Ader, an analyst with William Blair Company, said that Cisco’s forecast for relatively flat revenue in the first quarter was good news given the convulsions in the stock market recently. It shows some confidence by Cisco in corporate technology spending even as public sector sales are weak.

“People have been looking for stability,” Mr. Ader said. “It was a much more positive call than it has been in a year.”

The gain in Cisco’s shares in after-hours trading on Wednesday made up only part of the more than 40 percent decline over the last 12 months. They rose 93 cents, or 6. 7 percent, to $14.66 in after-hours trading. In regular trading, they fell 33 cents, or 2.3 percent, to close at $13.73.

While Cisco struggled over the last year, smaller rivals like Juniper Networks performed relatively well. More recently, however, Juniper and Brocade Communications Systems, another maker of technology equipment, have warned of slumping demand for their products.

While Cisco’s main primary products faced headwinds, some of its other businesses have showed strong growth in recent quarters. They continued to do so in the fourth quarter with a 32 percent gain in revenue from data center products and 33 percent increase from wireless products.

Mr. Chambers is counting on these newer areas to lift the company as its more mature products retreat or make small gains.

Cisco, based in San Jose, Calif., said it expected operating of 38 cents a share to 41 cents a share in the first quarter, in line with analysts’ expectations.

Article source: http://feeds.nytimes.com/click.phdo?i=b206003007c905a021c854c3d7de08cc

I.B.M. Reports Strong Second-Quarter Earnings

I.B.M., which turned 100 last month, delivered better-than-expected quarterly results Monday that showed the old company had a lot of life in it.

The company got a lift from robust sales of new models of mainframes — I.B.M.’s heritage — while its biggest current businesses, software and services, generated healthy growth as well.

The company reported an 8 percent increase in net income, to $3.7 billion. Its operating profits per share rose 18 percent, to $3.09 a share, reflecting fewer shares outstanding because of I.B.M. stock buyback programs. Bolstered by the strong performance, I.B.M. raised its guidance for earnings for the full year, to “at least $13.25 a share” from the previous level of “at least $13.15 a share.”

Samuel J. Palmisano, I.B.M.’s chief executive, said in a statement that the results were evidence that the company’s long-term investments to generate growth were paying off. Those growth initiatives include large investments to build up business in fast-developing markets outside the United States and Western Europe, and acquiring companies that specialize in analyzing vast amounts of corporate and online data for insights that can increase sales and trim costs.

The financial results, on a per-share basis, compared with analysts’ consensus estimate of $3.03 a share, as compiled by Thomson Reuters. In the year-earlier quarter, I.B.M. reported earnings of $2.61 a share.

Revenue grew 12 percent to $26.7 billion, up from $23.7 billion in the comparable quarter last year. The sales gain was helped by currency gains, as a weaker dollar translated to higher revenue from business overseas. Excluding the currency gains, revenue rose 5 percent. The average revenue estimate of Wall Street analysts was $25.3 billion.

I.B.M.’s stock price rose $3.20 a share at one point, or nearly 2 percent, in after-hours trading. During regular trading hours, the company’s shares slipped 26 cents a share, to close at $175.28 a share. In the last year, I.B.M. shares have gained more than 35 percent in value.

In his statement, Mr. Palmisano noted the company’s 100-year milestone. “As I.B.M. begins its second century,” he said, “we continue a process of transformation, positioning the company to lead in the future.”

In recent years, I.B.M. has pursued a business model intended to achieve revenue growth of roughly 4 to 6 percent, while reaching earnings growth per share in the low double digits. Share buybacks and constant efficiency improvements, the company says, make the higher earnings possible.

“It’s a very good quarter for I.B.M., with strong revenue growth by its standard and impressive profits,” said A. M. Sacconaghi, an analyst for Sanford C. Bernstein Company. “The company continues to deliver on its model.”

I.B.M. is the largest supplier to businesses of information technology — computer hardware, software and services. So its performance tends to reflect broader trends in corporate spending, and I.B.M.’s performance in the second quarter is a reassuring sign of business investment.

In the wider economy, consumer spending is soft and hiring weak, but private corporate investment has been robust — and spending on information technology represents more than half of all business capital investment. IDC, a research firm, estimated last month that business and government investment in information technology in the United States would grow at 5.6 percent this year, well ahead of the growth of the overall economy.

Gartner, a research firm, recently raised its forecast for the growth in global information technology spending in 2011 to 7.1 percent, up from 5.6 percent, a projection made a few months earlier.

Analysts say companies are investing in technology to automate business operations, like ordering supplies and tracking customers. Such investments, they say, typically have a quick payoff and are less risky in uncertain economic times than hiring new workers.

Company financial reports for the second quarter are just getting under way, but the quarter should be a strong one for the technology industry, based on analysts’ estimates. The 74 technology companies among the Standard Poor’s 500-stock index are expected to report profit growth of 12 percent, notes John Butters, an analyst for FactSet Research.

That is the third-highest growth rate among the 10 industry sectors in the index, trailing only the more cyclical industries like basic materials, which includes commodities like aluminum, steel and chemicals, and energy, which is dominated by the big oil companies.

For all of 2011, technology companies in the S. P. 500 are forecast to deliver total profits of $182 billion, more than any other sector, Mr. Butters said.

I.B.M.’s big services business grew 10 percent to $15.1 billion, though that was only 2 percent after excluding currency gains. Still, new signings at $14.3 billion were higher than most analysts’ estimates. New contracts, which can stretch over years, are a gauge of future business. In the previous few quarters, the pace of new contracts signed had been sluggish, raising some concerns among analysts.

Today, mainframes are a small part of I.B.M.’s business, but in new-product cycles they can add a jolt to profits.

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DealBook: Profit Up 24%, Citigroup Seeks Global Growth

The New York bank Citigroup said that earnings rose 24 percent in the second quarter.Robert Caplin/Bloomberg NewsThe New York bank Citigroup said its earnings rose 24 percent in the second quarter.

Vikram S. Pandit, chief of Citigroup.Andrey Rudakov/Bloomberg NewsVikram S. Pandit, chief of Citigroup.

8:43 p.m. | Updated

For two and a half years, Vikram S. Pandit was forced to hunker down to fix Citigroup’s troubled businesses and fend off the bank’s critics in Washington.

Now, after reporting a 24 percent profit increase for the second quarter, Mr. Pandit, Citi’s chief executive, is starting to play offense.

Citigroup has been hiring dozens of investment bankers, dialing up advertising and drawing up plans to add several hundred branches from Buenos Aires to Bucharest, including more than 200 in major cities across the United States. The bank is in the middle of stitching together its disparate technology systems — a mammoth effort known internally as Project Rainbow — and spending more than $1 billion a year to keep up its prized global transaction services franchise.

As a result, expenses have shot up more than 9 percent from last year and are expected to remain elevated though the end of 2011. Investors may have to wait a year or longer to see the payoff.

Despite an earful from Wall Street analysts, Citi executives say that after several years of cutting back on investment spending, they need to loosen their purse strings to make up lost ground.

John Gerspach, Citigroup's new finance chief.Citigroup, via ReutersJohn Gerspach, Citigroup’s finance chief.

“Coming out of the crisis, there wasn’t a lot of investing going on in 2008 and 2009,” John C. Gerspach, Citigroup’s chief financial officer, said during a conference call with journalists.

Stronger rivals like JPMorgan Chase, Goldman Sachs and Wells Fargo have been investing all along. Now, Mr. Gerspach added, “We are in investment mode.”

How Mr. Pandit keeps close tabs on expenses while building out his global banking franchise is perhaps his next great challenge. After clawing Citi back from the brink of collapse during the financial crisis, he has been engaged in an ambitious plan to transform it from a sprawling financial supermarket to a leaner, more focused company.

Mr. Pandit has been successful shedding assets, improving risk management and severing the bank’s ties with the federal government. His efforts, however, have not lifted Citi’s share price. It has floundered since the completion of a reverse stock split in early May that took the price to around $45 from $4.50. On Friday, it closed at $38.38, down 1.64 percent.

Citi showed the inherent power of its franchise when it pulled off a second-quarter profit of $3.3 billion, up from $2.7 billion last year, despite a sluggish global economy. Many analysts were skeptical of that headline.

Despite modest loan growth and strong investment banking fees, almost half of the bank’s pretax operating profit came from the reversal of more than $2 billion of funds the bank had set aside earlier to cover credit card and other loan losses.

And unlike the solid gains that JPMorgan showed on Thursday, revenue at Citigroup fell 7 percent from a year earlier, to $20.6 billion.

Profit in Citigroup’s investment bank was down by almost one-third from a year ago, falling to $1.2 billion. Traders on the currency, interest rate and mortgage desks were hard hit, while Citi’s equity derivatives group also reported lower revenues.

Its North American banking operations also struggled, with a litany of mortgage troubles continuing to weigh on its results. “I consider mortgages the biggest risk we run,” Mr. Gerspach said.

Although tighter supervision and the smaller size of Citi’s mortgage unit allowed it to avoid the charges that swamped Bank of America and Chase’s results, Citi was still forced to set aside an extra $224 million to cover potential losses on securities backed by faulty loans that it had sold to investors. That brought its total reserves to $1 billion.

The bank also raised its projections of mortgage servicing cost increases to around $70 million a quarter — double its prior estimates, although nowhere near the billion-dollar charges taken by its larger peers.

Abroad, the news was mixed. For the last two years, the bank’s consumer businesses in Asia and Latin America have been one of the few bright spots. Loan losses eased faster in those regions than in the United States, and corporate lending has been quicker to gain steam. That was true again in the second quarter, when nearly 60 percent of profit came from emerging markets.

But its European results were weak, particularly in its investment banking unit.

And then there is the expense problem. Operating costs for Citi’s core operations rose to $10.1 billion, a 14 percent increase from a year ago. Bank executives said that about one-third of that cost could be attributable to unfavorable exchange rates and another third to increased legal expenditures tied to mortgages and other issues. The rest comes from technology investments, hiring and other expansion efforts, largely outside the United States.

“We don’t like the idea that our expenses are going to be above guidance any more than anyone else does,” Mr. Gerspach said. “You can either manage back down to the guidance by cutting investment programs, or you can agree to press on.”

Some Citi analysts and investors, who have a long history of hearing the bank’s executives make promises they cannot fulfill, were skeptical. Others say the bank has little choice.

“The company was on its death bed, and the investing they were doing was to make sure they survived,” said Gerard Cassidy, a banking analyst at RBC Capital Markets. “Now, they are looking to make up for that period of time.”

Just as with investment spending, Citigroup will be playing catch-up to its main competitors when it comes to buying back its own shares. JPMorgan, for example, announced that it had repurchased about $3.5 billion of the company’s stock in the second quarter. Mr. Pandit has said that the bank is unlikely to do so until sometime in 2012.

This post has been revised to reflect the following correction:

Correction: July 15, 2011

An earlier version of this article misstated the loss for Citi Holdings. The group’s loss was $168 million, not $168 billion.

A photo caption with an earlier version of this article misstated the second quarter for Citigroup’s earnings. It was this year, not last year.

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