Rethink 50 shows strength and grows over 8% during election month

Rethink IT, Dec, 2004

The PC business was up 17% to $3.3bn, led by strong growth in what IBM calls mobile personal computers, by which we think it must mean notebooks.

Systems management through Tivoli was the fastest growing software business for IBM up 19%, followed by WebSphere up 14%, while Data Management, including revenues far DB2, was up 11%. Meanwhile the Lotus business was falling away slightly.

IBM ended the quarter with $9.7bn of cash and debt, including Global Financing, down to $22bn.

STORAGE SUCCESS

Storage leader EMC has quietly sneaked back to its best financial condition for some time, with a $2bn quarter growth of 34% and a net margin of over 10% yielding a $218m net income.

But of course it now counts all of its acquisitions in the total, in Documentum, Legato and VMware, but the company says that it grew organically at 20% without these additions.

That makes a profitable two years of a long term comeback for EMC, which now has $7bn in the bank, more than at any time during the dotcom boom.

The success at EMC has been to get on and sell to smaller enterprises, while other companies just talk about it, and it says that its CLARiiON, Centera and NAS businesses grew at over 50%, driven by smaller enterprises.

EMC's acquisition VMware delivered record quarterly revenues of $61m in the third quarter, an increase of more than 200% over last year.

EMC said that its fourth quarter would be between $2.23bn and $2.27bn. Computer Associates bumped up its valuation during the month from $15bn to

S17bn and it's a bit of a mystery why. This represents a multiple of its revenue of 4.5 times, a ratio that very few software houses achieve, only marginally behind Oracle which has a 23% margin.

CA has a negative margin of some 11%, but grew its revenue by much the same as Oracle at 6.5%.

Stand in CEO Ken Cron crowed about the fact that the company had resolved the outstanding government investigations, but just where future business and leadership is going to crone from is also something of mystery.

CA channel business grew by 20%, and the company says that once it has restructured it will expand margins.

Revenue for the second quarter was $855m, and above its guidance, which much have been a pleasant surprise for the new management team who could have had little to do with the outcome because they're so new.

But the key to the company's new found confidence must be the Fact that bookings (revenue signed for but not counted), went up by 70% to $690m, taking its total deferred subscription revenue to $4.4bn.

CA keeps track of this figure because it is revenue that can't be put into the accounts, because it hasn't been earned yet, but it is contracted for. CA holds $2.25bn in cash and put as much as $82m into the bank this last quarter in free cash flow.

It also acquired anti-spyware software from PestPatrol during the quarter and the company gave flat guidance of $850m to $865m for next quarter's revenue.

SLOW MOVERS

Towards the bottom end of the table of share price movements Seagate, the world's biggest disk drive marketer, continued to show weakness as it has throughout this year, with revenue off almost $200m on the quarter and profits at around 25% of those a year ago.