Microsoft expands buyback deal to goose sales of Surface, Windows phones

Microsoft has expanded a buyback program intended to boost sales of Windows smartphones and tablets, and will pay up to $350 for a wide variety of rival hardware powered by Apple's iOS and Google's Android.

Stephen Baker, an analyst at the NPD Group who specializes in retail, applauded the deal. "This is clearly a marketing ploy, [but] they usually prove to be good programs for getting people into stores," said Baker.

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The new program followed an earlier, more limited buyback deal that dealt only in Apple iPads. Customers can trade in a used iPad for a minimum of $200, with the funds placed on a gift card good for purchases at Microsoft's own retail stores.

Microsoft's expanded buyback accepts numerous rival devices, including smartphones and tablets running Android made by the likes of Samsung, Lenovo, and others; Apple iPhones and iPads; and even BlackBerry smartphones.

Customers receive quotes online from Clover Wireless -- one of the many "re-commerce" companies bidding for used hardware that they then refurbish and resell, mainly in developing markets outside the U.S. -- and then ship their hardware along with proof of purchase of a Windows phone or tablet. Assuming everything's approved, Clover returns a prepaid Visa card loaded with the payment amount.

The caveat: Customers must first buy a Windows smartphone or tablet.

"The Microsoft device must have been purchased within thirty days of the date you ship your old device," the program's FAQ states. The new purchase does not have to be a Surface RT or Surface RT tablet, but can be a third-party Windows-based phone from Nokia, HTC, Huawei, and Samsung; or a tablet made by Acer, Asus, Dell, Lenovo, Microsoft, Samsung, Sony and Toshiba.

Clover Wireless' quotes for used hardware were in line with those generated by other cash-back rivals. Clover quoted $75 for a used 16GB iPhone 4 running on Verizon's network, while Gazelle and NextWorth -- two popular buyback vendors -- offered $75 and $65 for the same device on Thursday.

Some critics panned the expanded program -- and earlier, the original -- saying that Microsoft was essentially paying for new customers, or trying to.

"Of course they are," retorted Baker. "That's the whole point of marketing and advertising. Whether it's rebates or buybacks or lower prices or advertising, companies pay for new customers. That's how things work."

Nor are Microsoft's buyback programs a mark of desperation, an easy-to-conclude analysis because the Redmond, Wash. company has struggled to sell its Surface tablets since their introduction last October.

"Anyone who says that knows nothing about consumer marketing, knows nothing about how to drive traffic into stores," said Baker, rejecting the desperation thesis. "These are smart moves, not stupid moves. If you're not doing something to drive traffic, that's a stupid move.

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Slight drop in tablet sales expected as wearables emerge

Researcher IDC last week slightly lowered its tablet shipment forecast for 2013 and beyond, saying that competing technologies, including larger-sized smartphones, and futuristic wearable computing devices will steal some dollars that would have gone to tablets.

In its revised predictions, IDC trimmed 2013 tablet shipment expectations by 1 percent from 229.3 million units to 227.4 million.

The change also affected forecasts IDC has made for the years 2014-17. IDC said global tablet shipments in 2017 will almost reach 407 million, about 1 percent less than a May estimate of 410 million.

IDC's projection for 2013, however, hinges on the tablet business having a bang-up back half of the year.

"A lower than anticipated second quarter, hampered by a lack of major product announcements, means the second half of the year now becomes even more critical for a tablet market that has traditionally seen its highest shipment volume occur during the holiday season," said Tom Mainelli, IDC analyst, in a statement.

Apple's iPad, for example, had a disappointing second quarter, with tablet shipments down 14 percent from the same period the year before. Like Mainelli, Apple CEO Tim Cook explained the downturn on the company's lack of a new iPad in the quarter. The first Retina-equipped iPad debuted in March 2012, and sales ballooned.

Along with slightly lower shipment tallies—which IDC attributed to the influence of larger smartphones, often dubbed "phablets" by wags, and wearable accessories that link to smartphones—the research firm also revised the timetable when emerging market dominate the business.

Phablets and wearables will impact developed markets—the U.S., Western Europe and Japan—before they do other regions, Mainelli said, and cause a faster-than-predicted slowdown there.

Where earlier this year IDC predicted that developed markets would hold a very narrow edge over emerging markets in 2017, now it has flipped the two, saying emerging markets—Africa, Central and Eastern Europe, China, Latin America and the Middle East—will account for 51 percent of all shipments in 2017.

Not surprisingly, China was highlighted as one of the countries expected to drive tablet sales.

"Much of the long-term growth will be driven by countries like China where projected growth rates will be consistently higher than the worldwide average," added Jitesh Ubrani, another IDC analyst, in the same statement.

If IDC's estimates end up accurate, Apple will have to adapt to retain its diminishing share of the tablet business. While the Cupertino, California company dominated the market with relatively high-priced devices until 2012, ever-cheaper models based on Android are continuing to drive down Apple's share.

The price competition will only get more fierce.

"We expect average selling prices to continue to compress as more mainstream vendors utilize low-cost components to better compete with the whitebox tablet vendors that continue to enjoy widespread traction ... despite typically offering lower-quality products and poorer customer experiences," Mainelli said.

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Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news.
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HP replaces enterprise chief, posts Q3 sales drop

Hewlett-Packard reassigned Enterprise Group chief Dave Donatelli on Wednesday as it reported an 8 percent decline in revenue for its fiscal third quarter, saying all of its major divisions except software brought in less money than a year earlier.

Chief operating officer Bill Veghte will take over the Enterprise Group, which makes the company’s x86 and Itanium servers and its enterprise networking and storage products. Donatelli will take on a new role helping to identify early-stage companies with potentially valuable new technologies, HP said in a press release.

At the same time, the company said it will reassign chief marketing officer Marty Homlish and merge its marketing and communications divisions under Henry Gomez, who is already chief communications officer and will take on the CMO role.

The financial report was gloomy but not unexpected. HP has suffered from declining sales in many of its businesses over the past several quarters.

The pain will continue even longer than HP had expected, according to President and CEO Meg Whitman. Speaking on a conference call about the third-quarter results, she backed away from an earlier forecast of year-over-year revenue growth in fiscal year 2014. Some parts of HP’s business may see such a gain, but the company as a whole is unlikely to turn revenue around that quickly, she said.

Whitman laid some of the blame on poor execution in the enterprise business, which it will be Veghte’s first job to correct. Among other things, the division’s marketing and sales efforts are misaligned with the market, she said.

But in another grim indicator for HP, Whitman said the PC market keeps shrinking.

“The PC market has not stabilized as much as I had anticipated it would,” Whitman said. “That stabilization has yet to occur.”

Despite the lower revenue, HP turned in earnings ahead of its earlier forecast for the quarter. The company earned $0.71 per share, compared with its previously disclosed outlook of 56 cents to 59 cents per share. Not counting one-time items, the company’s profit was 86 cents per share, matching the forecast by analysts surveyed by Thomson Financial. HP’s revenue also met analysts’ expectations.

However, ongoing sales declines continued in the quarter, which ended July 31. The Personal Systems Group suffered the biggest drop, with revenue down 11 percent from a year earlier. Within that division, notebooks were the weakest product category, down 14 percent in terms of units. The business was dragged down most by consumer sales, down 22 percent, while commercial revenue fell only 3 percent.

The Enterprise Group logged 9 percent lower revenue, led downward by Business Critical Systems (BCS), which were down 26 percent. BCS includes servers based on the Itanium processor family.

Printing revenue fell 4 percent, with revenue from supplies going down while hardware unit sales rose. The Enterprise Services and HP Financial Services divisions both posted revenue declines, but the company’s software business logged a revenue gain of 1 percent.

Economic woes across much of the world hurt HP’s ongoing recovery, Whitman said. Europe, the Middle East and Africa remained weak, with HP revenue falling 10 percent, while Asia-Pacific and Japan were mixed, she said. HP’s sales grew in India but fell in China, where the economy appears to be slowing, Whitman said.

However, she said results would be worse without HP’s continued cost-cutting. In the third quarter, another 3,800 employees left the company under an ongoing program to thin the ranks, and HP is on track to cut its workforce by 26,000 as planned by the end of this fiscal year, she said.

“I’m very confident that our turnaround is working,” Whitman said.

The stock market didn’t share her confidence on Wednesday. HP’s shares (NYSE: HPQ) fell 46 cents to $25.38 in regular trading and had plunged another $1.88 in after-hours trading late in the day.

Updated at 4:50 p.m. PT with comments from Meg Whitman.

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Applied Materials gets new CEO as sales, profits slip

Semiconductor company Applied Materials has appointed Gary Dickerson as its new CEO as the company tries to overcome declining sales and profits.

Dickerson, 56, will take the CEO post on Sept. 1. Dickerson, who is currently president, will replace Michael Splinter, who has been the CEO since 2003.

Dickerson came to Applied Materials after the 2011 acquisition of Varian Semiconductor Equipment Associates, where he was CEO. He also previously worked at KLA-Tencor.

Applied MaterialsApplied Materials' Michael Splinter, left, and Gary Dickerson

The new CEO will strengthen the company’s precision engineering operations and help deliver revenue and growth, Applied Materials said in a statement Thursday.

Applied Materials was one of the first semiconductor companies established in Silicon Valley when it set up shop at a small factory in Mountain View, California.

The company makes tools for fabrication plants in which chips and memory are manufactured. It also makes products for solar cells and displays.

The company also reported its earnings for the third quarter of fiscal 2013 on Thursday, recording profit of $168 million, a drop from $218 million in the previous year’s third quarter. Third-quarter revenue totaled $1.98 billion, falling from $2.34 billion during the previous year.

Orders from factories were weak during the quarter, but company executives expect orders to pick up as fabs are updated to make smaller chips and new types of memory like 3D NAND flash. Samsung is now shipping NAND flash with chips stacked upward, which increases storage density.

During his tenure as CEO, Splinter led Applied Materials to record profits and revenue, the company said. Splinter is due to receive Semiconductor Industry Association’s Robert Noyce Award this year for his contributions to the industry.

agam_shah@idg.com

Agam Shah is a reporter for the IDG News Service in New York. He covers hardware including PCs, servers, tablets, chips, semiconductors, consumer electronics and peripherals.
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Applied Materials gets new CEO as sales, profits slip

Semiconductor company Applied Materials has appointed Gary Dickerson as its new CEO as the company tries to overcome declining sales and profits.

Dickerson, 56, will take the CEO post on Sept. 1. Dickerson, who is currently president, will replace Michael Splinter, who has been the CEO since 2003.

Dickerson came to Applied Materials after the 2011 acquisition of Varian Semiconductor Equipment Associates, where he was CEO. He also previously worked at KLA-Tencor.

Applied MaterialsApplied Materials' Michael Splinter, left, and Gary Dickerson

The new CEO will strengthen the company’s precision engineering operations and help deliver revenue and growth, Applied Materials said in a statement Thursday.

Applied Materials was one of the first semiconductor companies established in Silicon Valley when it set up shop at a small factory in Mountain View, California.

The company makes tools for fabrication plants in which chips and memory are manufactured. It also makes products for solar cells and displays.

The company also reported its earnings for the third quarter of fiscal 2013 on Thursday, recording profit of $168 million, a drop from $218 million in the previous year’s third quarter. Third-quarter revenue totaled $1.98 billion, falling from $2.34 billion during the previous year.

Orders from factories were weak during the quarter, but company executives expect orders to pick up as fabs are updated to make smaller chips and new types of memory like 3D NAND flash. Samsung is now shipping NAND flash with chips stacked upward, which increases storage density.

During his tenure as CEO, Splinter led Applied Materials to record profits and revenue, the company said. Splinter is due to receive Semiconductor Industry Association’s Robert Noyce Award this year for his contributions to the industry.

agam_shah@idg.com

Agam Shah is a reporter for the IDG News Service in New York. He covers hardware including PCs, servers, tablets, chips, semiconductors, consumer electronics and peripherals.
More by Agam Shah, IDG News Service

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Why Lenovo's surging mobile sales shouldn't freak out the PC faithful

Something ominous occurred earlier this week: Amid all the talk about the Windows 8.1 release date, Lenovo quietly announced that it shipped more mobile devices than desktops and laptops in the second quarter.

Lenovo sells more computers than any other company, so that’s a mighty big feat indeed.

Good for Lenovo, right? Right. But beyond that one company, what does it mean when the world’s top PC manufacturer sells more tablets and smartphones than it does traditional computers? Is this yet another sign of the impending demise of the PC? Are we entering an era that will be dominated exclusively by smartphones and tablets?

Not so fast: The PC isn’t dead yet. It’s just not the blazing solo star it used to be.

Lenovo didn’t provide any specific numbers about just how many smartphones and tablets it shipped, and the exact split between traditional PCs and mobile devices isn’t concretely clear. That said, estimates from Gartner and IDC put the difference at a scant 300,000 units (12.9 million PCs to 12.6 million mobile devices).

“Lenovo’s PC shipments were still pretty strong,” says analyst Tim Bajarin, president of Creative Strategies. The popularity of the business-focused ThinkPad brand, combined with the consumer-centric IdeaPad line-up has buoyed Lenovo’s computer business, he says.

Lenovo

Despite shipping fewer PC units than mobile devices, however, desktops and laptops still make up a whopping 79.8 percent of Lenovo’s total revenues. Indeed, the company’s Mobile Internet Digital Home division—responsible for smartphones, tablets, and Smart TVs—made up just 13.7 percent of all money taken in by the company between April and June.

Lenovo’s smartphones and tablets may have just squeaked by PC shipments, but when it comes to the bottom line, the company’s PCs are still firmly in the driver’s seat.

But beyond all the talk about dollars and cents, what does Lenovo’s shift means for the rest of the PC industry? That’s a hard call.

Lenovo’s ThinkPad Twist hybrid: PC-Plus made flesh. Er, metal bits.

Lenovo is the only major PC producer that is also big player in smartphones and tablets. The widely diversified portfolio definitely gives Lenovo an edge over its major PC competitors, says Bajarin, especially in the enterprise space, where having a full range of mobile devices and PCs can help secure juicy corporate contracts.

After Lenovo, the next biggest PC vendor is Hewlett-Packard, a company that keeps talking about getting back into the smartphone game and increasing its push into tablets. But short of the dirt-cheap Slate 7 and a single high-end Windows tablet, HP remains solidly a notebook and desktop company.

As you look further down the PC top five, Dell hasn’t done much to excite buyers with its attempts at tablets and smartphones. The Taiwan-based titans Acer and Asus both produce smartphones, but are better known for their Android tablets. Both companies are top five tablet vendors worldwide and shipped a combined 3.5 million tablets last quarter, according to IDC.

Where things start to get really interesting, however, is when you look at the top 5 smartphone vendors in the world. That’s where you start to see firms that are more like Lenovo, particularly Samsung and Apple.

“When you combine PCs, tablets, and smartphones all together into one category, Apple and Samsung are dominant,” says Bob O’Donnell, IDC’s vice president for clients and displays. IDC has recently been tracking this super category called “smart-connected devices,” while Gartner calls the mega-grouping “anytime-anywhere computing.”

Apple’s iPhone 5.

Apple’s iPhone has routinely outsold the Mac since the iPhone 3G came out in 2008. Samsung doesn’t rank as a top five PC producer, but is hugely popular in the mobile world thanks to its line-up of Galaxy smartphones and tablets. Below those two market leaders, you tend to see a mish-mash of multiple brands—or as O’Donnell put it, “a lot of noise” where it’s hard to discern much of anything.

But over the last two quarters, O’Donnell says, Lenovo started breaking out to become the world’s third largest smart-connected device company behind Apple and Samsung. Lenovo’s gains are just a reflection of the fact that Lenovo wants to be a relevant device player and that means being a major player in all three categories, according to O’Donnell.

In the wake of his company’s stunning second quarter results, chairman and CEO Yang Yuanqing declared that Lenovo is “rapidly transforming…into a PC-plus business”—not a “Post-PC” business.

That’s the real takeaway here. Sure, the traditional PC market is hemorrhaging, and, yes, the mobile device market is exploding. But no matter how you slice it, both segments sell hundreds of millions of units year-in and year-out, and all of these slates and smartphones and desktops and laptops and flipping-flopping-bending hybrids just plain fall under the general umbrella of all-around computing.

When you look at it in that light, Lenovo hasn’t really done anything significantly differently than Apple and Samsung, the connected device leaders.

Yes, the fact that the world’s top PC maker sells more mobile devices sounds scary on the surface, but Lenovo’s only picking up on a trend where the PC isn’t necessarily deposed by slates and smartphones—it just plays a somewhat equal part in an increasingly larger universe of devices.

Ian is an independent writer based in Tel Aviv, Israel. His current focus is on all things tech including mobile devices, desktop and laptop computers, software, social networks, Web apps, tech-related legislation and corporate tech news.
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Strong sales of IP networking equipment drive Alcatel-Lucent revenue growth

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