Services save vendors' Q3 results

The latest crop of quarterly results from the industry's biggest players illustrate the gulf in profitability between manufacturing and services.

The latest crop of quarterly results from the industry's biggest players illustrate the gulf in profitability between manufacturing and services.

Chip giant Intel reported third-quarter results that exceeded expectations but reflect a slump in European sales. Turnover increased 19 per cent from $8.7bn to $7.3bn, five per cent higher than the last quarter. This was less than the 12 per cent analysts had expected, although the vendor had issued a sales warning.

Apple was similarly pessimistic, issuing dire warnings ahead of its released figures. The tactic worked, because when they were finally released last week, the results did not seem that bad.

Turnover for Apple's last quarter was $1.9bn, an increase of 40 per cent on the same period last year, but comes with a fall in profitability; margins were down from 28.7 per cent to 25 per cent. Sales of Cubes, its reshaped desktop machines, were down by $990m, which chief executive Steve Jobs said has caused unsold kit to be stockpiled.

Even Microsoft was forced to adopt these tactics. Its pessimism about its first-quarter results drove down expectations enough for its figures to disperse some of the clouds that had gathered over the company.

But analysts were not impressed that sales of Microsoft Office actually fell. The vendor's most profitable earnings came from its investments, with income surging from $550m to $1.13bn.

Services are clearly the way ahead. Financial services have proved unexpectedly lucrative for Microsoft, but another software firm is mining a rich seam in the software services market. Ariba is surpassing all of Wall Street's expectations, increasing its customer base by 500 per cent.

Fourth-quarter turnover grew from $17.1m to $134.9m. Nigel Montgomery, director at AMR Research, said: "Ariba sold its entire target in the first six months."