Tech Valuations Tumble, but Business Software Stocks Are Cushioned by the Cloud - 03 iunie 2022
Information-technology companies including International Business Machines Corp. (US.IBM), Hewlett Packard Enterprise Co. (US.HPE) and Oracle Corp. (US.ORCL) have shown resilience amid a rout in technology stocks. All three have so far outperformed declining market benchmarks since the start of the year. As of Wednesday, the tech-heavy Nasdaq Composite Index had fallen more than 23% since January. Over the same period, share prices for IBM, which sells cloud-based enterprise software and services, rose 4.3%. Prices for HPE, a business software firm spun off computer maker Hewlett Packard (US.HPQ), have held roughly steady. On Wednesday, the company reported $6.7 billion in sales for the quarter ended April 30, up 1.5% year-over-year, with online software orders roughly doubling from the previous year. Shares of software company Oracle haven’t fared as well, falling roughly 17% this year through Wednesday. But its prices have consistently remained above sliding tech-market benchmarks. In March, the company reported double-digit growth in cloud revenue for the quarter ended in February. Demand for enterprise technology was evident last week when semiconductor giant Broadcom Inc. said it would acquire VMware Inc. (US.VMW) in a deal valued at $61 billion. VMware is known for virtualization technology, in which software is used to replace more expensive physical equipment. Demand for cloud computing services, in which users rent computing resources, is strong. Global spending on public cloud services this year is expected to hit $494.7 billion, up 20.4% from last year, IT research and consulting firm Gartner Inc. estimates. Many companies employ multiple clouds, which creates a range of options for storing data or running applications. Salesforce Inc., (US.CRM) the cloud market’s largest pure-play seller of subscription-based enterprise software, on Tuesday reported quarterly revenue of $7.4 billion, up 24% from the same period a year earlier. The company, whose core product is customer-relationship management software, is on track to surpass $30 billion in annual revenue this year. The cloud-computing units of tech titans like Microsoft Corp. (US.MSFT) and Amazon.com Inc. (US.AMZN) have also continued to generate growth. In April, Microsoft reported $23.4 billion in cloud revenue for the quarter through March, up 32% from a year earlier, the company said. For Amazon, the cloud was an island of strength in April, when the company posted its first quarterly loss in seven years. Amazon Web Services, the company’s cloud-computing service, reported $18.4 billion in first-quarter sales, up 37% from a year earlier. Companywide, sales rose 7% to $116.4 billion.