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We're back with more earnings, and its some large-cap tech names that have the ability to really move the market. Let's look at Google (GOOG), IBM (IBM), and Nokia (NOK).

GOOGLE

Google reported quarterly results yesterday and is always a stock that many pay attention to. They derive a majority of their income from online advertising through their popular search engine, which has a massive market share. Let's take a look at their quarterly results, announced after the bell. (data from reuters)

• Google's quarterly profit and revenue rose in the second quarter despite the tough advertising market, beating Wall Street expectations.
• The Web search leader said on Thursday that revenue in the three months ended June 30 totalled $5.52 billion, compared with $5.37 billion a year earlier. Analysts were looking for $5.49 billion, according to Reuters Estimates.
• Google posted net income of $1.48 billion, or $4.66 a share, compared with $1.25 billion, or $3.92 a share, in the year-ago period. Excluding certain items Google earned $5.36 a share, ahead of the $5.08 per share expected by analysts.
• Google said its paid clicks, or number of times that users clicked on its advertisements and generated revenue for the company, rose 15% compared to the same period a year earlier.

Google had a nice quarter, beating analysts expectations on revenue and net income. International revenues ticked up to 53% vs. 52% last quarter, and I know the street will like that. But Google is also quietly tightening up on expenses to make the numbers come out, which is something they were never really known for. When I say tighten expenses, I mean get rid of employees. At the end of Q2, Google had 19,786 vs. 20,164 at the end of Q1. Google also had a tax rate of 20%, which is well below average.

Google's stock reacted somewhat negatively after the announcement, it its likely due to the large run-up in the stock prior to earnings. When you price a stock to "perfection", anything less than that is likely to disappoint investors.

IBM

IBM is one of the best indicators of technology and the worldwide economy. Everything from software to servers to consulting, this should give us a view into how the global economy is running. Here's the results from IBM, again after the bell today: (data from reuters)

• IBM reported a 13 percent fall in revenue amid a decline in corporate spending, but cost cuts and a shift to more profitable businesses helped it achieve higher-than-expected earnings, and the company raised its outlook for the full year.
• International Business Machines Corp said it now expects full-year earnings of "at least $9.70" per share, up from its previous outlook of $9.20.
• IBM's second-quarter revenue fell to $23.3 billion from $26.8 billion a year earlier. That was slightly lower than analysts' average forecast of $23.5 billion, according to Reuters Estimates. But net profit for the quarter rose to $3.1 billion from $2.8 billion in the year-ago quarter.
• Profit per share rose to $2.32 from $1.97, much higher than the average Wall Street forecast of $2.01 per share, according to Reuters Estimates.
• Its gross profit margin rose to 45.5 percent from 43.2 percent a year earlier, it said.
  

IBM has many business segments, and here is a little bit of a breakdown, first geographically(data via IBM press release):

• The company expects full-year 2009 pre-tax income for its Software segment to grow at a double-digit rate and reach approximately $8 billion.
• From a geographic perspective, the Americas’ second-quarter revenues were $9.9 billion, a decrease of 9 percent (7 percent, adjusting for currency) from the 2008 period. Revenues from Europe/Middle East/Africa were $7.9 billion, down 20 percent (7 percent, adjusting for currency). Asia-Pacific revenues decreased 7 percent (5 percent, adjusting for currency) to $4.9 billion.
• OEM revenues were $537 million, down 24 percent compared with the 2008 second quarter. Revenues from the company’s growth markets organization decreased 11 percent (up 1 percent, adjusting for currency) and represented 18 percent of geographic revenues.

And by segment:

• Total Global Services revenues decreased 12 percent (4 percent, adjusting for currency); pre-tax income increased 23 percent.
  
• Global Technology Services segment revenues decreased 10 percent (2 percent, adjusting for currency) to $9.1 billion.
  
• Global Business Services segment revenues decreased 15 percent (9 percent, adjusting for currency) to $4.3 billion.
  
• IBM signed services contracts totaling $14.0 billion, at actual rates, a decrease of 5 percent (up 3 percent, adjusting for currency), including 17 contracts greater than $100 million.
  
• Signings in Consulting and Systems Integration and in Integrated Technology Services were $6.0 billion, a decrease of 14 percent (7 percent, adjusting for currency).
  
• Total outsourcing signings increased 3 percent (12 percent, adjusting for currency) to $8.0 billion.
  
• The estimated services backlog at June 30 was $132 billion at actual rates compared with $126 billion at March 31, 2009.
• Revenues from the Software segment were $5.2 billion, a decrease of 7 percent (flat, adjusting for currency) compared with the second quarter of 2008.
  
• Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $3.0 billion, a decrease of 2 percent (up 5 percent, adjusting for currency) versus the second quarter of 2008.
  
• Operating systems revenues of $529 million decreased 11 percent (4 percent, adjusting for currency) compared with the prior-year quarter.
• Revenues from the Systems and Technology segment totaled $3.9 billion for the quarter, down 26 percent (22 percent, adjusting for currency).
  
• Global Financing segment revenues decreased 10 percent (4 percent, adjusting for currency) in the second quarter to $568 million.

I also noticed that they said they are well on their way to achieving their goal of $10 to $11 in 2010. This is clearly a company that is doing an excellent job of "managing" its way through this recession. Revenues were down a little bit, but margins were up, and profits were up. Also, I noticed that revenues from total outsourcing contracts increased, one of the few segments that did, which isn't a surprise, but a telling statement.

In my mind, the most important factor in IBM's results was that they guided higher for 2009. Everyone knows there is still tremendous uncertainty out there. When will the recession end? Late this year? Next Year? When I company of this magnitude can go ahead and raise their estimates from $9.20 to $9.70, then I think you can say they are doing well.

NOKIA

Nokia has been dominate in the mobile phone market for years and have exposure in nearly every segment of the industry. They reach all customers throughout the world, but in the past few years have been under increasing pressure from smartphone makers Apple and Research in Motion. Here's their quarter, and it wasn't pretty (via Reuters):

• The world's top cell phone maker Nokia cut its profitability and market share forecasts due to tough competition, sending its shares sharply lower on Thursday.
• Nokia, whose rivals include Apple, Samsung and RIM, now sees second-half underlying operating profit margin at its key phone unit at the first-half level of 11.3 percent, compared with analysts' consensus expectations of 17.4 percent in a Reuters poll.
• Nokia also cut its forecast for 2009 market share at its phone business, seeing it now on a par with last year, compared with an earlier forecast for a rise.

Here's a bit more data and some commentary (via Marketwatch):

• For the three months ended June 30, net profit attributable to equity holders fell to 380 million euros ($535 million), or 0.10 euro a share, from 1.1 billion euros, or 0.29 euro a share, earned in the year-earlier period.
• On an adjusted basis, Nokia reported a profit of 0.15 euro a share, slightly better than the 0.13 euro a share that analysts, on average, were expecting.
• Sales continued to weaken in the second quarter at Nokia, although the company witnessed signs that demand is stabilizing. Overall sales fell 25% to 9.91 billion euros. At the mobile-devices unit, they dropped 28% to 6.6 billion euros.
• The Finnish manufacturer shipped 103.2 million phones in the quarter, down 15% year on year, but up 11% sequentially. The quarter-on-quarter improvement came as no surprise as the first quarter is traditionally the weakest for phone makers. Nokia blamed the lower year-on-year volumes on "weaker consumer and corporate spending, constrained credit availability and currency-market volatility."
• Its market share fell to 38% from 40% a year earlier but improved from 37% in the first quarter. Nokia reiterated its forecast for global mobile shipments to contract 10% this year. The company also scrapped its goal to gain market share in the second half, and said the operating margin in its mobile-device division will remain flat in the second half, at just above 11%. Previously, Nokia had forecast the margin to be in "the teens."

There was some positive here as Nokia did manage to increase market share in the smart phone segment from 39% to 41%, and I'm a little surprised there hasn't been much focus on that, considering how much analysts weigh the results of Apple and RIMM.

• The N97, a touchscreen phone that is Nokia's closest thing to an iPhone rival, performed strongly since its launch, Chief Executive Olli-Pekka Kallasvuo said on a conference call. Half a million units were shipped in June alone.
• Still, the model may never perform as well as the N95, which was Nokia's previous blockbuster, in part because the competitive landscape is tougher than it was at its launch at the start of 2007.

The market obviously didn't like what they heard from Nokia, but I'm a little surprised. The market seems to be rewarding companies even though their numbers aren't coming in particularly strong. The falling profit margins (11.3 percent vs. 17.4 percent expected) was big, as was the cut in forecast for overall market share. These aren't great numbers, but again, compared to some of the results we've seen, and the subsequent market reaction, this is a little surprising.


Aside from Nokia's difficulties, we saw mostly positives from the large-cap tech sector yesterday. The bulls are going to use this as argument that we have continued signs the recession is coming to an end and its time to buy stocks. Bears will likely point that profits are beating lowered expectations and are being buoyed by slashing expenses and specifically employees. And when you fire employees, you may make your numbers for the quarter, but it isn't doing the economy much good.

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