Brand giants boost profits

12 May 2011

NEW YORK: AT&T, Microsoft and Johnson & Johnson are among the major brand owners most effectively driving up profits in a challenging trading climate, a study has argued.

Fortune, the business title, has released its latest annual list of the most profitable corporations, led by energy giant Exxon Mobil, boosted by surging oil prices, and achieving an income of $30.5bn in 2010.

Telecoms specialist AT&T lodged $19.9bn, as wireless data revenues expanded by 30% annually, and network quality improved.

One of AT&T's key strengthes has been its exclusive rights to Apple's iPhone, and even though Verizon is now offering this device, AT&T activated 3.6m such handsets in the last quarter, a 1m leap year on year.

"Once they compared, and they understood that on our network the iPhone works faster, that it has simultaneous voice and data, and it works in over 220 countries, I think they made their choice," said Ralph de la Vega, AT&T's ceo.

Chevron claimed third in Fortune's rankings, on $19bn, just ahead of Microsoft's $18.8bn, as the IT group benefitted from generating 175m unit sales of its Windows 7 operating system since late 2009.

While Fortune suggested such success was somewhat surprising given the absence of a "hot-selling mobile phone or tablet", Microsoft's recent purchase of Skype has seen it take a step in this direction.

"We see enormous opportunity that brings together what people want – data, voice, video, IM, all on a single screen - whether it's a smartphone, a PC, a slate, or the TV," said Steve Ballmer, Microsoft's ceo.

"Microsoft and Skype together will define this future and what it really, really looks like."

JPMorgan Chase & Co's recovery from the financial crisis gained pace, as profits struck $17.4bn, beating retailer Wal-Mart, securing $16.4bn, although US same-store returns declined during 2010.

In response, Wal-Mart is emphasising multi-channel sales, widening product assortments, implementing a remodelling programme, and reinforcing the core "everyday low price" proposition.

"Wal-Mart will deliver consistent every day low price, which is what the Wal-Mart brand stands for," said Bill Simon, president of Wal-Mart US.

IBM posted earnings of $14.8bn last year, as its diversification into areas including cloud computing and analytics software yielded rising demand.

Perhaps the star performer was Apple, as revenues climbed 146% last year and income hit $14bn, aided by the launch of the iPad and the iPhone's continuing appeal.

"I think the user appreciates that Apple can take full responsibility for their experience, whereas the fragmented approach turns the customer into a systems integrator, and few customers that I know want to be a systems integrator," said Tim Cook, Apple's chief operating officer.

Johnson & Johnson logged a 9% lift in profits, to $13.3bn, despite witnessing "one of the most difficult years in its history", mostly due to product recalls.

"I and all our people know it is our responsibility to learn from what happened, address any problems at the root causes and ensure only the highest quality products reach our customers and thus earn back their trust and respect," said Bill Weldon, its ceo, earlier this year.

Elsewhere in the top 20, Procter & Gamble, the FMCG titan, saw a 5% slide in earnings, to $12.7bn, tumbling from fourth to eleventh as a result, but was credited for taking the "long view" and boosting adspend by $1bn.

"I'm not going to worry about $0.01 below consensus on earnings per share, cut back advertising and effect the long-term health of this business. That's not what we're about," Jon Moeller, P&G's cfo, said last month.

Data sourced from Fortune, Seeking Alpha; additional content by Warc staff