Wall Street Beat: Tech earnings stay strong

Financial results from Microsoft, SAP, EMC, AT&T, Verizon and other tech vendors this week reinforced optimism that 2011 is shaping up to be a strong year for IT, especially in the enterprise sector.

ending Dec. 31, announced Thursday, could be seen as a microcosm for the tech sector as a whole. Enterprise software is expected to drive IT sales growth this year, as the rate of increase in spending on hardware slows.

Though Microsoft generated US$19.95 billion in revenue, a 5 percent increase from a year earlier and a record for the quarter, profit was down to $6.63 billion from $6.66 billion. Microsoft shares were trading at $27.66 Friday afternoon, down by $1.22 on the news.

Part of the reason for the profit decline was that the year-earlier results were boosted by $1.71 billion in deferred revenue, reflecting pre-order sales of Windows 7, launched in October 2009.

But even after the deferred revenue, andextraordinary gains from the year earlier are taken out, Microsoft Windows revenue still increased only 3 percent year on year, less than company watchers had been expecting. PC sales growth is expected to slow down a bit this year, and this could affect related technology such as desktop operating systems, including Windows.

The good news on the software front is that sales for the Microsoft Business Division, which includes Office, increased 24 percent, boosted by demand for Office 2010, launched in June.