Briefs: April 18, 2005

IBM MISSES FIRST-QUARTER FORECAST

Net income rose 3 percent to $1.40 billion, or 84 cents per share, from $1.36 billion, or 79 cents per share, a year ago. Earnings from continuing operations totaled $1.41 billion, or 85 cents per share, including stock-based compensation expenses.

Analysts surveyed by Thomson Financial/First Call were looking for IBM to report higher earnings of 90 cents per share on sales of $23.65 billion in the latest quarter.

Revenue grew 3.3 percent to $22.91 billion from $22.18 billion last year. After adjusting for currency translations, sales increased only 1 percent.

"After a strong start, we had difficulty closing transactions in the final weeks of the quarter, especially in countries with soft economic conditions, as well as with short-term Global Services signings," Chairman and CEO Sam Palmisano said. "As a result, we did not achieve all of our goals for the quarter."

MICROSOFT PLANS BETA 2 RELEASE OF VISUAL STUDIO
Microsoft this week plans to release Beta 2 of Visual Studio 2005 and an April Community Technology Preview of SQL Server 2005, said Tom Rizzo, director of SQL Server at Microsoft. The second beta of Visual Studio 2005 is now feature-complete and has all the team edition components in the beta code. Microsoft is preparing to release 14 different Visual Studio 2005 offerings based on Express, Standard, Professional and Developer, and plans to ship the final product during the second half of 2005.

Meanwhile, the company also plans to announce a Community Technology Preview of SQL Server 2005, as well as go-live licenses for the prerelease Visual Studio 2005 and SQL Server 2005 to enable corporations to legally deploy the prerelease software for production use. However, Microsoft will not offer support until the products are released.

CISCO ISSUES LATEST IN SERIES OF SECURITY BULLETINS
Cisco Systems warned via a security bulletin that some of its routers, switches and other products are vulnerable to denial-of-service attacks, the company's third security advisory in a week.

The bulletin, posted on Cisco's Web site, details how the Internet Control Message Protocol could be exploited to launch DoS attacks against the Transmission Control Protocol. The result could cause connection resets or reduce throughput of existing connections, according to the advisory.

Cisco has issued a free software fix and said workarounds are also available.

The vulnerability impacts all versions of the company's Internetwork Operating System (IOS) and particularly affects products that run Cisco IOS and have Path Maximum Transmission Unit Discovery enabled.

IOS-based and some non-IOS-based products are susceptible, including multiple models of the company's routers and switches, as well as its Aironet WLAN access points and bridges, CRS-1 service provider router, PIX Security Appliance, Catalyst 6608 voice gateway, multiple IP phones and several other products.

COMPUTER HORIZONS, ANALYSTS INTERNATIONAL TO MERGE
IT services firms Computer Horizons and Analysts International are combining to form a $600-million-a-year IT services company. The Computer Horizons name will survive and the firm will be based in Minneapolis where Analysts International has been located.

In addition to providing IT services, the combined company will have a government practice serving federal, state and local government agencies with annual sales of about $65 million. The new entity will also continue delivering services to midtier markets.

AMD REPORTS 1Q LOSS
Advanced Micro Devices said pricing pressures in the flash memory market led the company to post a loss of 4 cents per share for its first quarter of 2005. The loss was down from Wall Street expectations of a 2-cents-per-share profit.

AMD turned in sales of $1.23 billion for the first quarter, compared with $1.23 billion for the same period in 2004. AMD's loss was $17 million for the quarter, compared with a profit of $45 million for the first quarter of 2004.

The company appeared ready to take steps to address softness in flash memory. AMD said it had filed for an initial public offering of Spansion, the joint venture for flash memory that it has operated with Fujitsu. The IPO would take the form of a spin-off for Spansion, of which AMD owns 60 percent and Fujitsu owns 40 percent. ORACLE COMPLETES RETEK BUY
Oracle has now acquired 94 percent of Retek stock, effectively completing its acquisition of the retailing software vendor last Tuesday, said Oracle President Charles Phillips. Oracle had purchased 5.5 million shares of Retek on the open market before launching its tender offer March 9, and received an additional 48 million shares last Monday as a result of the offer, which expired April 11.

Oracle will form a separate Retail Global Business Unit to bring Retek retailing applications to market quickly, Phillips said in a statement. With a separate unit, "we will be able to maintain the specialization of Retek's employee base and quickly go to market in the retail sector," he said.

Oracle made the acquisition to better compete with application producer SAP, which made two bids to acquire Retek itself, driving the price from $8.50 a share to $11.25. SAP already offers retailing applications.

SUN NARROWS 3Q LOSS
Sun Microsystems narrowed its losses in its fiscal 2005 third quarter, the vendor reported last Thursday. The company lost $9 million compared with a loss of $760 million a year earlier.

Revenue was $2.63 billion, a 1 percent decline from $2.65 billion in sales in the same period last year. The third-quarter loss included the favorable impact of $54 million in settlement income from the Microsoft deal struck a year ago, as well as a $69 billion foreign tax boost and other benefits. Without these one-time gains, the vendor would have lost 2 cents a share, missing the break-even estimates of analysts polled by Thomson Financial/First Call.

The results continue Sun's four-year struggle to sustain profits—or even turn a profit at all. Despite its less-than-stellar quarterly results, Sun executives maintain the company is on the right track.

During last Thursday's earnings conference call, Chairman and CEO Scott McNealy said Sun does not plan additional cost-cutting measures and believes the company will turn itself around.

"All of this is moving the company in the right direction," McNealy said. "There's not a lot more we can do, and we're going to continue the 30-plus projects we have in gear to reduce our cost structure, give us more flexibility and get more efficient on the spending side."

Moreover, McNealy said customers are no longer worried about Sun's long-term viability and are now showing more interest in the products and solutions the vendor offers.

"What has gone away in the marketplace is [the question], 'Are you going to make it?' " he said.