Will IBM Realize Growth In 2015?

International Business Machines Corp said it is projecting growth in its hardware sector next year as the company invests in research and development and abandons low-performing ventures.

The comments come less than one month after the world’s largest technology service company reported its lowest quarterly revenue in five years, weighed by sluggish global demand for its hardware, which plunged 23 percent in the first quarter of 2014.

The company added that growth in Latin America, the Middle East and Africa remain strong, and blamed falling revenue in China on government reforms affecting state-owned clients, and on the country’s hardware-heavy portfolio.

“We move on and we spread ourselves out, more industries, more clients, cloud, data, et cetera, around there,” said IBM Chief Executive Ginni Rometty at an investor briefing on Wednesday.

Chief Financial Officer Martin Schroeter said to stabilize the hardware sector IBM would continue to “refresh” hardware and further invest in research and development.

“Quite frankly, we are seeing very good growth out of software, good growth out of services, but challenges in hardware,” said Schroeter. “We will stabilize that hardware base and I am comfortable we will make that happen in 2014,” he said.

He reiterated the company’s EPS target for 2015 of at least $20. He expects a shift to higher-value business to bring in $3.25 and share repurchases to add $2 in earnings per share by 2015.

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Juniper Boots Employees

Juniper Networks plans to reduce its global workforce by six percent and focus on its high-growth businesses. Juniper said most of the cuts would impact middle management positions and that it expected to incur cash charges of about $35 million in the first quarter, related to severance and other expenses. The company had 9,483 full-time employees as of December 31.

Juniper also said it would stop development of the application delivery controller technology, which helps remove excess load from servers, resulting in a non-cash intangible asset impairment charge of about $85 million. The company said it plans to consolidate its facilities, flog off of about 300,000 square feet of leased facilities.

Juniper added that it expected to record other non-cash asset write-downs of about $10 million in the first quarter and that it expects to carry out more restructuring in the second quarter.

Hedge fund Elliott recently claimed that Juniper shares were “undervalued” and could be worth $35-$40 if Juniper focused on revamping its core business of making routers and switches for mobile carriers such as Verizon and AT&T. Shares of Juniper are currently worth at $26.35.

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IT Dissatisfaction Growing

Companies want to reduce spending on IT operations and infrastructure and shift resources to revenue-producing areas, according to two new studies. But businesses leaders and IT executives are also registering higher levels of dissatisfaction with IT as more demands are placed on technology.

The reports, by the Hackett Group and McKinsey & Co., both agree that business executives want IT to do more to improve the bottom line while companies spend less on infrastructure in the process.

The bad news for people who work in IT operations is that large businesses expect to cut IT staff positions by about 2% this year, thanks to automation and outsourcing, according the Hackett’s survey of 160 businesses with revenues above $1 billion.

One path to improved automation will likely be through adoption of software-defined infrastructures, something Bank of America plans to do.

IT budgets will grow by 1.7% this year as IT pivots, increasingly, from a service-providing operation to a revenue-generating one, the Hackett Group said in its study.

IT managers are being told that “you’ve got to grow the business, not just run the business,” said Mark Peacock, an IT transformation practice leader and principal at Hackett.

McKinsey & Co., in its online survey of more than 800 executives — with 345 having a technology focus — also found that executives want less of their budgets to go to infrastructure so more resources can be shifted to analytics and innovation.

The McKinsey survey found that business executives are less likely to say now that IT performs effectively, compared to their views two years ago.

“The IT executives are even more negative,” wrote McKinsey, with only 13% of them saying their IT organizations “are completely or very effective at introducing new technologies faster or more effectively than competitors.” That percentage was down from 22% in 2012.

The negative results “likely reflect the overall rising expectations for corporate IT,” wrote McKinsey.

When asked how to fix IT shortcomings, respondents cited improved business accountability, more funds for priority projects and a higher the level of IT talent, the report said.

The Hackett Group survey didn’t report on dissatisfaction, but it did find that the top goal for IT organizations this year is “to strengthen partnership and goal alignment between IT and the business.”

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Did Intel Kill Bay Trail?

Intel has decided that some of its budget Bay Trail parts have been out evolved and flung them into a tar pit. According to CPU World the parts first appeared in September. Intel released budget Bay Trail systems on a chip for mobile and desktop markets, under Celeron and Pentium brands.

They were manufactured on 22nm technology, and featured such enhancements as greater number of CPU cores, higher clock speeds, beefed up graphics unit, not to mention an out-of-order microarchitecture, that improved per-clock CPU performance by up to 30 per cent faster compared to their predecessors. With this performance goodness it is a little surprising the Intel has decided that all the all Bay Trail SoCs will be discontinued in a matter of a few months. Details of the planned discontinuation were published this week by Intel in several Product Change Notification documents.

The Desktop Pentium J2850, along with mobile Celeron N2810 and Pentium N3510 are already End of Lifed and its last orders will be in two weeks, on February 11. The chips will ship until April 25, 2014. Also retired are mobile Celeron N2806, N2815, N2820, N2920, and Pentium N3520. Their EOL date is April 11, 2014, and they will ship until May 30, 2014. On August 22, 2014, Intel is going to discontinue Celeron J1750, J1850, N2805 and N2910. The “J” models are desktop processors, and the “N” are mobile ones. There is no word on Z-series Bay Trail-T parts, none appear to be EOL’d at this  time.

Furthermore, on the same date Intel will retire Core i7-3940XM Extreme Edition, and boxed and tray versions of Core i7-3840QM and i7-3740QM CPUs. The last shipment date for the Celerons and Core i7s is February 6, 2015.

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Disney To Lay Off Workers

Walt Disney Co is making plans to lay off several hundred people in its interactive unit, the division that includes gaming products and the Disney.com website, The Wall Street Journal reported earlier this week.

The job eliminations are expected to begin after Disney releases its quarterly earnings today, the Journal said. Playdom, a social gaming business Disney acquired in 2010, is one division expected to see cutbacks, the newspaper said.

Disney is trying to turn around the interactive unit, which has about 3,000 employees. Its new Infinity video game enjoyed strong initial sales after its release last August, helping the division report a $16 million profit for the quarter that ended in September, an improvement from the $76 million loss a year earlier.

A Disney spokeswoman had no comment.

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T Mobile Sees Growth

T-Mobile US has reported a fourth-quarter boost in customer growth and offered to pay customers to ditch rival service providers, escalating already intense competition in the U.S. wireless market.

The company, the No. 4 U.S. mobile operator, promised payments of up to $350 per line to consumers who break their contract with any of its bigger rivals and switch to T-Mobile.

The offer came just days after AT&T Inc promised a $200 credit to T-Mobile customers who switch. While AT&T also offered up to $250 for switching customers who trade in their phone, T-Mobile said it would pay up to $300 for trade-ins.

The companies have been targeting each other because they use the same network technology, making it easy for consumers to bring their phone when they switch, but some on Wall Street are concerned they will cause an industry-wide price war.

T-Mobile said it hoped that whole families as well as individuals would switch to its service in response to the new cash offer, which is aimed at covering early contract termination fees typically charged by wireless operators.

John Legere, the outspoken chief executive of T-Mobile, said he hoped the offer would end the “industry scam” of family plans, which tie entire families into long-term contracts.

Legere joked that AT&T’s recent offer would actually play to T-Mobile’s advantage because it would allow AT&T customers to try a different service with less financial risk than before.

“If it doesn’t work they’ll pay you to come back,” Legere said in announcing the offer at the Consumer Electronics Show in Las Vegas.

T-Mobile, which is 67 percent owned by Deutsche Telekom, managed to turn the corner on four years of customers losses in 2013 by criticizing its rivals and promoting its service plans as being more flexible and consumer friendly.

It said it added 1.645 million net customers in the fourth quarter, up from 1.023 million in the quarter before, marking its third quarter of customer growth for 2013.

The fourth-quarter additions included 869,000 valuable post-paid customers, which was up 13 percent from the third quarter, according to the company.

It said customer defections, known in the industry as churn, stayed at third-quarter levels of 1.7 percent and compared with 2.5 percent in the fourth quarter of 2012.

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Sony Decides Not To Sell

Japan’s Sony Corp has changed its mind and decided not to sell its lithium-ion battery unit.  Instead Sony has decided to take a chance at turning the business around with a weak yen and growing demand for smart phone batteries.

In addition to a weak yen, which can boost overseas earnings, the battery unit is also seeing increased demand for some of its new products, the Nikkei business daily reported.

For the past two years Sony had been planning to offload the unit, which was a pioneer in making lithium-ion batteries for computers and mobile devices but has struggled recently against cheaper South Korean rivals.

A government turnaround fund tried to broker a sale of the battery business to a Nissan Motor Co Ltd and NEC Corp joint venture earlier this year.

However, talks have stalled and Sony has now told the turnaround fund that it will hold on to the battery unit and develop it as a core business, the Nikkei reported, citing unidentified sources.

Sony, which last year sold its chemical business to the government turnaround fund, is trying to revive the fortunes of its consumer electronics business by focusing on cameras,gaming and mobile devices.

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3D Printer Goes Retail

MakerBot, a 3D printer maker which opened two new retail stores last week, is among the companies trying to bring the cutting-edge digital manufacturing technology to Main Street consumers, but skeptics say the debut may be premature.

MakerBot, a unit of Stratasys Ltd, opened retail stores this week in Boston and in Greenwich, Connecticut, both of which are twice the size of MakerBot’s first store, 1,500 square feet in downtown Manhattan.

The company offers designs for more than 100,000 items through its “Thingiverse” online user community. The products range from knick-knacks like zombie sculptures to jewelry, sink drains and even medical devices. They are printed using its line of corn-based plastic fibers in more than a dozen colors.

“For most people 3D printing is futuristic science fiction. We’re here to make it real,” said CEO Bre Pettis, who cut the ribbon at the store on Boston’s fashionable Newbury Street using scissors made on one of MakerBot’s Replicator printers which start at $2,199.

Pettis, who has purchased splashy magazine ads to promote 3D printers as holiday gifts, believes there could soon be a 3D printer on every block in America.

Yet some technology experts say 3D printers may not be ready for prime time because they are still much less user friendly than most modern consumer electronics.

“There is so much hype,” said Pete Basiliere, an analyst at technology research firm Gartner. “People are getting a little bit misled as to how easy it is,” he said.

Some investors also are skeptical of 3D printing’s readiness for the market. Short-seller Citron this week published an article questioning the earnings of Germany’s voxeljet AG’s, and shares in the sector fell, including those of MakerBot parent Stratasys and rivals 3D Systems Corp and ExOne Co.

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Is Lenovo Eyeing Blackberry?

Lenovo reportedly has joined the list of possible Blackberry buyers, with the firm reportedly having approached the struggling Canadian phone maker.

The Wall Street Journal reported that Lenovo, despite previously denying that it was mulling a Blackberry buy (paywalled), has been given the thumbs up to cast an eye over the Canadian company’s books before making it a possible offer.

If reports are to be believed, Lenovo has joined a list of possible buyers that includes Intel, Cisco, SAP, Google, Samsung and LG.

Specific details of Lenovo’s possible acquisition are yet to be revealed, but as a newcomer to the smartphone market Lenovo recently admitted that it is selling more smartphones than tablets and PCs in China, despite being one of the only PC makers to continue showing sales growth.

However, Lenovo’s smartphone portfolio is yet to appear the UK, and the firm hasn’t seen much success outside China. However, picking up Blackberry could help Lenovo enter the global smartphone market, and the firm could be looking to take over from Blackberry as a phone maker focused on business professionals.

Lenovo might have a hard time closing a buyout deal for Blackberry, though. Rumours about a takeover have already led to speculation that such a buyout would struggle to get approval from the US and Canada, due to the company’s Chinese ownership and the fact that Blackberry does business with sensitive parts of both governments.

Blackberry didn’t comment on a possible Lenovo buyout, but instead put out its usual vague statement. A company spokesperson said, “The special committee, with the assistance of Blackberry’s independent financial and legal advisors, is conducting a robust and thorough review of strategic alternatives.”

Lenovo declined to comment on the report.

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HTC Cutting US Jobs

In another sign of trouble at HTC, the Taiwan-based mobile device maker began downsizing its U.S. operations on Friday, eliminating an undisclosed number of staff.

The move is meant to “streamline and optimize” the company’s U.S. organization “after several years of aggressive growth,” HTC said in a Monday email. A company spokeswoman declined to specify how many employees would be affected.

“However, to achieve our long-term goals as a business and return maximum value to our shareholders, this is a necessary step to drive ongoing innovation,” the company said.

HTC has been facing a difficult year on weak earnings that have sent its stock price tumbling. In the second quarter, its net profit plummeted 83 percent year-over-year, despite strong reviews for its flagship smartphone, the HTC One.

The weak financials are major change from only a couple years ago when HTC was riding high selling Android smartphones in the U.S. But starting in late 2011, the company’s net profit has sagged on increased competition from Samsung and Apple.

To recover, HTC has focused on building up its “One” smartphone brand. In addition, the company has expanded its China presence, and in August launched a new marketing campaign that’s enlisted Hollywood actor Robert Downey Jr.

While the company has largely focused selling high-end handsets, in July HTC said it was planning on selling more mid-tier and entry level phones to regain market share. The new phones will launch at end of the third quarter or early fourth quarter.

But the company’s troubles go beyond issues with smartphone sales and marketing. In September, Taiwanese authorities arrested three HTC employees for allegedly stealing company secrets. One of the employees arrested was Thomas Chien, HTC’s vice president of product design.

HTC has declined to offer further details on the case.

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