Second-quarter results from German enterprise resources planning software giant SAP this week showed revenues rising 5 per cent, at constant currencies, to €2.9bn (£2.4bn), with licence sales up 5 per cent and services revenue 8 per cent higher. But an intriguing aspect to the numbers was the extreme deviation between operating performance in the US compared with the EMEA (Europe, Middle East and Africa) region.
Software revenues at constant currencies in the US rose 40 per cent but were down 12 per cent in EMEA, while overall sales from EMEA were flat, but 11 per cent ahead in the US. This divergence in performance illustrates the faster recovery in the US, especially against the UK and Europe.
US-based titans of technology such as Intel, Microsoft, Dell, Oracle and Adobe Systems have all recently reported strong revenue growth, underlining how customers are catching up with software investments that were previously postponed. Microsoft, for example, has sold 150m copies of its new Windows 7 operating system since its debut in October, the company's fastest selling product ever.
After falling by 4.2 percent in 2009, global tech spending is set to rise by 3.8 percent, to $1.5trn, this year, according to market researcher IDC. Technology is a cyclical business because hardware and software upgrades are among the first budgets to be trimmed when companies need to cut costs. But it also means tech spending can bounce back sharply as economies improve, such as in the US this year.
UK microchip designer ARM has been at the sharp end of the US recovery thanks to the success of smart phones such as Apple's iPhone. Even though its technology features in nine out of every 10 mobile handsets sold, we recommended selling the shares because of ARM's logic-defying valuation nearly three months back (). Last year about 30 per cent of ARM's £305m revenue was earned in the US. This week it tried to cap expectations given uncertainties over consumers' ongoing love affair with electronic gadgets, but the shares remain just 5 per cent shy of their 353p all-time high, reached last week, thanks to the company signing an eight-year licensing deal with Microsoft, potentially signposting its long-awaited breakthrough into netbooks, tablet computers and PCs.
