The news that SAP will have more sales of cloud solutions than those using the traditional licensing model in the next year or is a bit of an eye-opener. This is because SAP has been one of the more solid, careful vendors who has been reluctant to jump into new ideas before their time. It also has a large number of major corporates as customers, which means they too are jumping on the cloud model and are not afraid to commit their data and systems to it. In many ways, this, plus the news of IBM's revealed 35% of current sales in cloud, mobility and security business as it too undergoes a transition, shows just how fast things are changing. As we finalise the agenda for the European Software and Solutions Summit in April in London, we are aware of the pressures of the stock market and how it dominates business news, but we these fundamental shifts, as evidenced by major IT companies, will somehow be more important in the long run.

SAP SEES CLOUD OVERTAKE TRADITIONAL MODEL IN TWO YEARS

SAP had “exceptional momentum” in the fourth quarter with fast growth in cloud and double-digit growth in its core license business, it has confirmed, updating guidance earlier this month. For the full year, cloud and software revenue grew by 20% or 12% at constant currencies and exceeded the outlook of 8% - 10% growth at constant currencies. New cloud bookings increased 103% in the full year to €883m and 75% in the fourth quarter to €344m. "Our strength in 2015 shows that the S/4HANA innovation cycle is well underway," said Bill McDermott, CEO of SAP. "Our completeness of vision in the cloud has distinguished SAP from both legacy players and point solution providers. We beat on cloud and software, we beat on operating income and we are ever confident that SAP will remain a profitable growth business well into the future."

"Our tremendous 2015 results validate our strategy of innovating across the core, the cloud and business networks to help our customers become true digital enterprises," said Luka Mucic, CFO of SAP. "We have transformed our company and made it leaner by shifting investments from noncore activities to strategic growth areas enabling us to capture the tremendous growth opportunities in the market. This puts us on a strong path for the future reflected in an increase of our 2017 ambition."

EMEA region had an outstanding performance in the fourth quarter, it says, with an 11% increase in cloud and software revenue including a strong double-digit software license performance in Germany and Russia. Non-IFRS cloud subscriptions and support revenue in EMEA grew by 53% with very strong double-digit growth in new cloud bookings.

Looking beyond 2016, SAP is raising its 2017 ambition to reflect both the current exchange rate environment and excellent business momentum. By 2017 SAP continues to expect its rapidly growing cloud subscriptions and support revenue to be close to software license revenue and is expected to exceed software license revenue in 2018. Assuming a stable exchange rate environment going forward SAP now expects non-IFRS cloud subscriptions and support revenue in a range of €3.8bn - €4.0bn in 2017. The upper end of this range represents a 2015 to 2017 CAGR of 32%.

SAP continues to anticipate that the fast-growing cloud business along with growth in support revenue will drive a higher of more predictable revenue. Given the current software license revenue momentum it now expects the total of cloud subscriptions & support revenue and software support revenue to be in a range of 63% - 65% of total revenue in 2017.

IBM MARGINS LOWER AS IT AIMS AT SAAS SCALE

The need for scale in cloud and software sales has been made most strongly by IBM's latest results. Shares in IBM dropped after the company reported that its Q4 revenue fell year-on-year for a 15th straight quarter; it also cited currency exchange headwinds. The decline, however was mainly in the US and AsiaPac; Europe rose 1%. The profitability has been affected by its move to cloud. It is a business in transition, as it admits, reporting Q4 revenue of $22.1bn, down 9% on year ago numbers. IBM is showing cloud and analytics expansion, but the growth isn't strong enough to offset declines elsewhere. The company said total cloud revenue was $10.2bn, “as-a-service” sales were $4.5bn. IBM said it has a run rate of $5.3bn for cloud delivered as a service, with analytics revenue up 7% from a year ago. CEO (below) said IBM now derives 35% of its sales from cloud, analytics, mobile, social and security. “Europe returned to growth, led by continued growth in Germany, France, and the UK. In fact, Germany posted double-digit growth and in December, we announced Munich as the headquarters for our new IoT business, as well as our first European Watson innovation centre,” she added.

Martin Schroeter, IBM’s Senior Vice President and Chief Financial Officer: “IBM is a high margin solution company. For the as-a-Service component of that, the margins are a little bit lower than that. Now a lot of that is because we don’t yet have the scale that we’d like or it’s that we’re investing very heavily in order to drive that platform into our clients’ environment. And so, we’ll see margin improvement as we go into 2016 as we add more scale or take advantage if you will of the investments we have made. So in total the strategic imperative revenue over time will not have a dramatically different margin profile than what we see today.” The topics of scale and cloud transition for software companies are on the agenda of the European Software and Solution Summit set for April in London, details here

RED HAT GOES AFTER TELCOS IN EUROPE

Red Hat – set to be a $2bn business soon, and still growing at around 20% a year is drawing up its list of targets for sales in Europe this year, and it looks like telecomms companies are top of its list. EMEA GM Werner Knoblich (below) talked to IT Europa this week “There is a telco push this year – we are recognising the potential in the market, and the move to using OpenStack. The telcos want a system that can cope with moving resources around their networks – similar to enterprise use of virtualisation, but able to cope with changing workloads,” he says.

OpenStack is the Open Source Cloud computing platform aimed at public and private clouds, and backed by the likes of Red Hat, HPE, Cisco, IBM, Intel, Dell, EMC, and NetApp......

“We see OpenStack for telcos in the same way as we saw Linux for financial services in the late '90s – the investment banks made Linux mainstream; it was all about trading platforms, and they just got faster speeds and lower latency with it. Linux became accepted in the enterprise not because of cost, but functionality. They legitimised it and we can see the telco industry doing the same for OpenStack.”

The telcos as an industry seems to have decided that OpenStack will be the technology to virtualise the networks, he says. And it is a huge business with even bigger potential. So far Red Hat has sold just to the IT departments of telcos but, on average, 10% of telco technology spend is on IT and 90% in the network area.

Telcos are looking to roll out services on their networks so they must have the management and flexibility; telcos today are all about appliances, running dedicated software from the NEPs, he explains. This means dedicated systems, and potential lock-in. So as bandwidth use rises, they need to be able to move resources around to match traffic.

“It is like what VMware did, abstracting hardware from software; this gives much higher utilisation and this is fundamentally what they are doing – everything becomes software defined and become a VNF – virtual network function, which become software appliances, sitting on a neutral platform. They want to mix and match applications from the other vendors and today this is almost impossible.”

They see Red Hat as in a strong position, he says “We are independent and neutral – we don't have any hardware and there's no lock-in, and that is why there is now a big drive for this. From an OpenStack perspective in Red Hat, telco is a really important market – we have reorganised and from March 1 will have a dedicated force in EMEA.”

This is not just in go-to-market and sales, but on the product side he has dedicated engineering teams, and is advancing the telco requirement upstream. “We don't want to create a version of OpenStack for them – like the carriers wanted their own version of Linux and we resisted that. This is important – they don't need a carrier grade OpenStack – they need an OpenStack that is carrier grade. It is a subtle difference. We ensure they get advances and perhaps telco-specific features earlier but it is not a different product. This then goes into the mainstream product.”

OpenStack is the plumbing but even hotter is the overall digitalisation and the differentiation of products which comes from software – it is the communication and integration platform for the future. Openstack is so popular with vendors because nobody wanted to see the repeat in cloud of what happened in virtualisation where VMware became a dominant player. IBM, Intel, HP, Cisco, etc. all support OpenStack for this reason, and are investing millions of dollars in its development.

The platform now has huge resources behind it. And now that VMware has released its own version of OpenStack, this is a key indicator. Other heavy users such as banks are also backing OpenStack but it is not yet a product for the rest of the market, he thinks “This will take some time. The big guys will make it happen first.”

But there is a problem with finding enough skills to work with the platform. OpenStack skills are not so much a matter for partners yet so much as for the individuals with the knowledge. “OpenStack, like any new sophisticated technology is seeing a skills shortage. That is why we doing a lot on training – we are known for the excellence of our online education and we have increased it further to make it easier to consume in smaller chunks.”

Some partners have seen the trend and have committed to it and getting trained up; they find they can charge higher rates and there is a lot happening on the skills development, especially among the integrators who are interested in selling those capabilities onwards.

HP INC EASES OFF ON PORTFOLIO SALES

The channel is already getting the fruits of the split from HP Enterprise, HP Inc's commercial channel director for UK and Ireland, Neil Sawyer says. “There are lots of new things- we're more flexible and more responsive; there is a resurgence and many new initiatives.”

He points to a new pricing response tool for special deals: “From 1 February – we have a whole new pricing response tool which will give every partner a tender or special price for end customer project within 30 minutes and we weren't able to do that before. It is something our partners have been asking for. In the past we have got the price right the first time round in less than 40% of opportunities. With the investment in analytics tools we can get it right in 70% - so this is the change our partners will see from new systems. It works through distribution as well.”

“I've nor heard any negatives from channels; our relationship with partners is better– we are able to do more things and invest in new services. For example – when we have CEO and strategic discussions we can talk more about HP Inc and the solutions we are putting forward with more focus on what we are doing. This is very much the objective. Two months in, we are seeing the fruits of the split,” he says.

“The other thing I've been able to do – as announced in November – is that we are putting partners first in all our interactions. In the past we could have been clearer in stating who we are working with. So we can say that with a specific group of customers, we will put the channel first. Moving forwards we can be clear about where our special relationship with customers starts and stops and I'm really excited about this as it means we can have a meaningful relationship with our resellers. Often they may have come up against HP – they will never come up against us again because we have a clear line in the sand that they know about.”

He spoke to IT Europa at a presentation of new educational devices including Sprout (below), which integrates image processing and scanning with tools for schools. This may require specialist channels, but is also being picked up strongly by the broad line distributors, he says. The channels themselves are undergoing a yearlong qualification and accreditation setting process, so it is all in flux at present.

“With this type of technology it is very niche and some of our gold partners will emerge, selling immersive technology, new software solutions and mobility portfolio. A few weeks ago we announced the HP Partner First programme and we are now going through the qualification criteria. From next November 1 we will have a range of partners who are platinum in print or PC or supplies or one or two of these. We're a lot more flexible, particularly with partners who may have sold one part of our portfolio. And we need to be more accommodating of those partners who are specialists.”

HP Inc has 6500 partners in the UK, with a few hundred platinum and gold levels that contribute a significant part of its business, with a team of over 70 to manage those relationships. “We still want our partners to sell as much HP as possible, across the portfolio, working with our financial services. But we know there are lots of partners who don't sell everything and we need to respect that. That is what Partner First is about. This will allow us to accommodate them - we are saying that they can be specialists”.

We have to pick our investments with the new tech including immersive. We have a good heritage of specialist resellers in graphics, software, cad/cam, education etc. who will have a big part to play. We have to place our bets carefully and work with those partners who are able to take these technologies into to those niche markets. I think that the partners with Adobe and Autodesk will help. I'm excited by the idea of working with a whole new partner base that perhaps we have not worked with before.”

The market has changed a lot with many resellers looking for new revenue streams, while maintaining a value relationship with customers.

“We are also talking to specialist distributors but we also have some broad-liners who want to widen their ranges. Discussions with those broad liners in UK&I shows how they are looking to cover this sort of product; some 20-30% of discussions in their review meetings are on new areas they see it as a growth opportunity.”

Finally on education subscriptions, HP has brought in a low cost model for laptop supply through the channel. “I've been working on this for nine months, working with HP financial services we can deliver a laptop to a student for under £5/ month including a warranty and service and support, licensing and management. The channel are the sales engine for this. We have launched it with a number of partners including CCS media, Softcat and Insight among others where we have put in meaningful investment in sales training and so far so good. It now goes out to the broader resellers base.”

“I see a healthy business here – we are a transparent business, delivering brand and financial services. Also the channel is the best sales community. The channels needs to become comfortable in having a conversation on the subscription model.”

PWC BUYS POLISH CLOUD CONSULTANCY

PwC is buying consulting business Outbox Group for its specialised cloud-based solutions and transformational services for clients across the UK and Europe. Poland-based Outbox specialises in customer, digital and technology services working with platforms such as Salesforce, Microsoft Dynamics.

The deal comes after previous acquisitions by PwC, including the European consultancy Mokum, and Booz & Company (now Strategy&), in 2014. The addition of Outbox Group will increase the firm's contingent of technology practitioners to almost 3,000 across EMEA, it says as more than 250 Outbox employees will join PwC.

PwC’s UK and EMEA consulting leader, Ashley Unwin, said: "This acquisition represents a major milestone for PwC's UK and Central and Eastern Europe alliance and its commitment to invest in emerging markets. It is also a significant addition to our customer and digital capabilities and sees the establishment of a Centre of Excellence for these skills within PwC in Europe."

PwC's UK and EMEA technology consulting leader, Jonathan Tate, commented: "Our clients are prioritising growth and investing to deliver great experiences to their customers. This acquisition was driven by a rising demand from our clients in digital and customer transformation as well as the need to offer services from strategy through to execution. Outbox will allow us to present a truly differentiated offering, enabling us to deliver larger and more transformational solutions to businesses across the UK, Poland and the rest Europe. It will also support one of the firm's strategic priorities to further embed technology into its services."

Outbox managing director, Nicholas Mobbs, who will join PwC as a partner said: "We created Outbox 10 years ago in Poland. Through dedication and hard work we have tapped into the wave of disruptive technological change, leading to considerable success across Europe with our unique position around a customer first multi-technology strategy. The potential market for customer experience, CRM and digital is estimated at over €6bn and we see this growing even in challenging economic times."

ASPECT PULLS IN VP FROM RACKSPACE

Aspect Software has appointed John Hough to the position of Regional Vice President of Sales, Northern Europe. Hough joins the customer engagement technology leader from managed cloud services company Rackspace, where he drove a 25% year-on-year growth as Head of Enterprise Sales EMEA.

With more than 22 years’ experience in direct sales, Hough’s career spans telecoms, FMCG and transportation. He has held sales leadership roles in several Fortune 500 companies and managed sales personnel across EMEA for blue-chip organisations including Orange, Unilever, Coca-Cola and Vodafone.

Hough’s appointment comes shortly after the confirmation of Stephen Ball as SVP Europe & Africa at Aspect, augmenting a senior leadership restructuring in the EA region, and strengthening the company’s strategic push in specific geographical markets. Based in London and responsible for driving sales growth across Northern Europe (including the UK and Ireland, Nordics and Benelux), Hough will work with Ball and the global senior leadership team to drive sales strategy forward.

Chief among his priorities will be to develop existing Northern European customer relationships with the Aspect technology portfolio, which includes Aspect Unified IP and Zipwire, mobile self-service platform Aspect CXP, and workforce optimisation suite Aspect EQ WFO.

CHINESE TECH INCUBATOR LAUNCHED IN LONDON

Chinese technology and investment group Cocoon Networks is launching a £500m ($720m) London- based venture capital fund aimed at investing in UK and European tech start-ups.

Cocoon Networks, which has the backing of China Equity Group, one of the first investors in to Baidu, China's answer to Google, and Hanxin Capital, which specialises in cloud computing and bio tech investments, will look to invest in tech companies whose products and services show promise and potential for growth in the Chinese market.

The fund will look to invest in tech companies across a wide range of sectors including fintech, biotech, medical devices and the UK's creative tech industries, like fashion-tech. Companies looking to expand into China will also be offered assistance in navigating Chinese legislation and practical help about doing business there.

As part of a wider investment, Cocoon Networks, in partnership with University College London, is also setting up an incubator space, in order to provide the best environment for growing tech start- ups. John Zai, Founder and CEO, Cocoon Networks said: "The fund will provide capital to help the development of some excellent technology and innovative projects in London and the UK. The fund and incubator programme will bring awareness for more Chinese investors to get into London’s booming technology sector. It will also help many companies grow and expand into China."

The incubator, a 70,000 sq. ft. building is situated in the heart of London's Tech City close to Moorgate, Liverpool St, and Old Street stations. Cocoon says it will not only be an incubating space for technology companies but it will also work with some of London's universities to attract talent, offer accelerator programmes and co-working spaces. The incubator will work with start-ups to take products from the concept phase and test them in a real environment – Cocoon’s own digital testing labs – before going live on the public market. Cocoon says this testing and support infrastructure enables start-ups to compete on a level playing field with larger companies. Over the last nine months 28 Chinese companies, worth £23million ($33m) to the city's economy, have already pledged to set up in London, with that figure expected to rise to nearer 40 by the end of March 2016. The previous best year for Chinese investment in London was in 2011/12 when 30 Chinese companies came to the city.

Li Cha, Founder and Managing Partner, iStart Ventures LLC, added: "The Chinese economy is vastly in need of innovation which comes from either competition in the domestic market or from international inspiration. In this respect, London is a good source of international trends and aspiration in technology and cultural creativity. Chinese investors have started exploring opportunities outside of China, in order to grab hold of global cutting edge technology as well as to diversify their portfolios. In light of this, London serves as the best hub in Europe."

D-LINK NAMES NEW HEAD FOR UK AND IRELAND

D-Link has promoted Paul Routledge to the position of the company’s country manager, in the UK and Ireland. His nomination is expected to help develop new channels to market and his extended responsibilities will also include post sales and service delivery. D-Link is currently growing its cloud enabled smart solutions and market share for business wireless and switching IP surveillance solutions, it says.

The appointment of Routledge is effective immediately and he will be based at D-Link’s European Head Office in London, reporting directly to Sales and Marketing Director Southern Europe and UKI, Luigi Salmoiraghi.

Routledge joined the company over five years ago and worked for the European Business Development and later accepted a role of Sales and Marketing Manager for the UK and Ireland in 2014. Additionally, he has over 20 years of experience of channel development in the UK and across Europe. In the past he held a number of different positions including Business Development and Channel Sales management roles with vendors and distribution partners such as CCI Distribution, Adaptec and Eurologic Systems.

“This is a more expansive role for Paul with a strong focus on bringing quality products to the market via D-Link’s channel partner community. Paul will look to capitalise on his experience and lead the UKI team in achieving further growth, while developing new business opportunities and partnerships,” says Luigi Salmoiraghi.

EU SEEKS TO LIMIT US DATA ACCESS

The European Union wants guarantees of effective limits on US authorities' power to request people's personal information from companies to conclude a new EU-US data transfer pact, a top EU official said on Monday, as a deadline from EU privacy regulators looms, reports Reuters.

Securing sufficient assurances US spies will not access Europeans' personal data indiscriminately once it is transferred across the Atlantic has been a major point in two years of talks on a new framework for protecting data shifted to the United States. Under EU data protection law, companies cannot transfer EU citizens' personal data to countries outside the 28-nation bloc deemed to have insufficient privacy safeguards, of which the United States is one.

"We need guarantees that there is effective judicial control of public authorities' access to data for national security, law enforcement and public interest purposes," EU Justice Commissioner Vera Jourova said at a conference in Brussels.

The talks took on added urgency in October when the EU's top court struck down the 15-year-old Safe Harbour framework, used by more than 4,000 firms to transfer Europeans' data across the Atlantic easily, because the material was vulnerable to being accessed by US authorities on national security grounds.

Adding to the pressure, EU data protection authorities gave the two sides until the end of January to come up with a new framework for protecting data transferred to the United States, failing which they could start taking enforcement action against companies. Jourova said talks would continue on the margins of the World Economic Forum in Davos, Switzerland. Andrus Ansip, the EU Commissioner responsible for digital affairs, is due to meet US Secretary of Commerce Penny Pritzker on Thursday. The Commission is also seeking more transparency on limits to US security services collecting personal data, Jourova said. US negotiators have so far resisted a mandatory system for companies to report numbers of US government access requests, people familiar with the talks have said. However, one alternative would be for the United States to keep the EU informed on how often US authorities access personal data on national security grounds as part of an annual review process of the new framework, two of the people said, according to Reuters.

ERICSSON ACQUIRES US TV AGGREGATOR

FYI Television is a US-based global TV metadata and entertainment image content provider based in Grand Prairie, Texas, with approximately 150 employees Combining FYI Television's US-market expertise and reach with Ericsson's position in content discovery in Europe will create a powerful global force in content discovery, it says as Content discovery is a key component of Ericsson's TV and Media strategy to improve the video experience in a multiscreen world.

The acquisition, which is subject to customary closing conditions, will strengthen Ericsson's position in broadcast and media services. FYI Television accumulates and distributes TV entertainment content and linear scheduling data from over 9,000 TV networks daily, aggregating the information into customized formats for various digital, media, content, analytics and print clients for use on their connected devices such as tablets, phones, desktops, internet portals and gaming consoles.

The growing range of TV and video services available on a variety of devices creates a wide range of options for viewers to choose between. Based on Ericsson's latest ConsumerLab research, half of linear TV viewers say they can't find good programming to watch on a daily basis - highlighting the importance of content discovery. Whether viewers are watching linear or on-demand video, this move aims to ensure they can discover content whenever - and wherever - they search for it; and always in the right format.

ERP ACQUISITION IN CZECH MARKET

Czech IT products and software development company Solitea has announced it has bought a business information systems provider J.K.R. to boost its position as a supplier of ERP systems on the Czech market. This is not the first purchase in this market as Solitea already owns other ERP specialists such as Cigler Software, Altus Software and Vema.

The Czech holding, which hires over 500 people and has a revenue of CZK700m (€25.9m), operates mainly in the Czech, Slovak and Austrian markets however it is reaching out to customers also in Hungary, Germany, Switzerland, Serbia, Finland and Turkey, it says.

“Solitea’s aim is to simplify business activities for companies of all sizes via its products and solutions. The acquisition of J.K.R. is only another step in fulfilment of this aim. For Solitea, the purchase of J.K.R. represents a strategic investment with the aim of increasing market share as well as an opportunity to also supply Solitea’s own ERP system to large companies. In the Czech Republic, Solitea has the most customers using ERP solutions, and thanks to the consolidated use of resources and know-how of all members of the holding, we can focus on development of new products using technology with higher added value for customers,” says Martin Cigler, Chairman of the Board of Directors, Solitea.

“Solitea is primarily a strategic investor and represents an opportunity for fast growth through effective cooperation with the Holding. The acquisition will primarily benefit current and future users of our BYZNYS ERP systems, both with regard to know-how and technology and through the availability of a more extensive offering of solutions and services,” adds Vladimir Kralicek, Director General of J.K.R.

LOGITECH SPINS OFF VIDEO CONFERENCING ARM

Swiss provider of computer accessories Logitech has announced that its video conferencing business Lifesize has become an independent company although Logitech will keep an interest, it says. Three venture firms from Silicon Valley Redpoint Ventures, Sutter Hill Ventures and Meritach Capital Partners have decided to inject together $17.5m in the budding company. According to Lifesize, the capital will be used to grow its customer base, expand engineering headcount and strengthen its brand in the cloud-based services segment. The new company will be led by Craig Malloy, the CEO at Lifesize.

“No other company in the industry has Lifesize’s global distribution, channel relationships and unrivalled product differentiation. It is obvious to us that the enterprise-grade reliability coupled with its unique hardware advantage will keep fuelling the company’s remarkable growth. Redpoint has backed Craig in each of his last three ventures where he pioneered every new and disruptive innovation in video collaboration. We are excited to support him once again in leading this next wave of cloud-based collaboration,” says Jeff Brody, Partner at Redpoint Ventures.

“This is an exciting step for Lifesize and is the result of the tremendous work we have done to create a unique offering in the video conferencing and collaboration space. We have a 12-year heritage of leadership and industry innovation and a strong executive team in place. Standing as an independent will allow us to invest more meaningfully in our product roadmap and be more responsive to the market and our customers, which put Lifesize on a path for impressive growth and success,” adds Craig Malloy.

IBM BUYS GERMAN FRAUD DETECTOR

Continuing its analytics-related acquisition spree, IBM has bought IRIS Analytics, a German provider of software for detecting payment fraud in real-time, investigating fraud cases, and modelling/simulating a company's response to a fraud event. Terms are undisclosed.

IBM says: "IRIS provides a real-time fraud analytics engine that leverages machine learning to generate rapid anti-fraud models while also supporting the creation and modification of ad-hoc models, proven successful on various sized payment platforms ... IRIS serves to bridge the gap between expert-driven rules and traditional predictive modelling by applying artificial intelligence and cognitive techniques to partner with human experts in suggesting best fit analytics interactively, while testing and deploying models with real production data, as it happens and without downtime."

IRIS is used by "leading banks and payment processors throughout the world," it says and allows fraud countermeasures to be deployed faster than existing techniques relying on "black box" models. The purchase follows IBM's 2013 acquisition of malware-protection software firm (used by many top banks), and its 2011 purchase of security analytics firm i2 (used by law enforcement agencies and companies to detect illicit activity within operational log data).

INTEL MANAGES PRICE RISES, BUT SERVER OUTLOOK NOT SO GOOD

Intel shares have fallen even though gross margin in Q4 was 64.3%, +130 bps Q/Q and -110 bps yr./yr., and above a guidance midpoint of 62%. Q1 non-GAAP GM guidance is also at 62% (+/-2%). Intel's tax rate was just 16%, down from 26.9% in Q3 and 21.4% a year ago.

Meanwhile, the 2016 capex budget has been cut by $500m to $9.5bn (+/- $500M). (Intel's November guidance)Server CPUs: Worrying the Street, however is the prospect for the Data Centre Group (DCG) where revenue rose just 5% yr/yr in Q4 to $4.31bn, after growing 12% in Q3. Volumes rose +7% yr/yr as average selling prices fell just -1%. The division operating income fell 4% yr/yr to $2.17bn. Intel previously forecast a 15% CAGR for DCG through to 2018.

PC/mobile CPUs were also supported by Intel's Skylake CPU ramp and a positive mix shift; as a result Client Computing Group revenue fell just 1% yr/yr to $8.76bn in spite of a weak PC market, an improvement from Q3's 7% drop. Volumes were down -16% yr/yr, but prices were up +17%.

Desktop volumes -9%, ASPs +9%. Notebooks volumes -10%, ASPs +6%. Tablet volumes -33%, ASPs were "up significantly." In other segments: Internet of Things Group (embedded CPU) revenue +6% yr/yr to $625m; operating income -25% to $132m. Software/services revenue -3% to $543m. "All other" (flash memory, one-time charges, divested businesses) revenue +11% to $682M; but still making an operating loss of $817m vs. $852m a year ago.

ERICSSON MARKED DOWN BY ANALYST

Ericsson has been downgraded by analysts and shares fell in an uncertain market. "With worse than expected revenue declines and high [emerging markets] risk, we expect no EPS growth in 2016," writes Deutsche's Johannes Schailer, downgrading Ericsson to Hold. His target has been cut by SEK15 to SEK85 ($9.94).

Schailer still sees Ericsson making progress towards a goal of SEK9B/year ($1.05B/year) in cost savings by 2017, but adds this is already reflected in his estimates and that "upside from further cuts in problem areas like IP routing seems unlikely for now despite the Cisco partnership." His 2016 EPS estimate has been cut by 4%; Schailer notes the cut would've been greater than 10% if not for the Apple settlement.