Market Week: A Peek at Techâs Strength
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Whether high tech returns continue may become clearer this week, when two pairs of high-profile companies announce second-quarter earnings.
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(InfoWorld) - Now that the dust has settled after last week's stock-market plunge, industry insiders are looking forward to continued stable growth in the IT sector. When a plunge in Asian markets last week caused panic share-selling around the world,Â IT investors reassessed the technology sector's prospects for the year. IT vendors had enjoyed seven months of rising share prices up until last week. But last week, several leading analysts said that a long-overdue correction was occurring. However, brokerages were upgrading their share-buying advice on bellwether IT companies, even as markets in general were declining. The upgrades continued this week. For example, chip-equipment makers' share prices are rising this week as analysts foresee user hardware spending increases through 2008. Thursday, Applied Materials and KLA-TencorÂ shares rose after analyst upgrades. Morgan Stanley raised its rating on both companies to overweight from equal weight and raised its rating on the whole semiconductor capital-equipment sector to attractive from in-line. Also this week, JMP Securities raised it rating on AMD to market outperform from market perform, forecasting strong sales for new products. In the telecommunications sector, AG Edwards & SonsÂ upgraded AT&TÂ from hold to buy, predicting that demand for wireless communications will spark growth. Last week, even as markets were in turmoil, analysts issued upgrades in several sectors. Robert W. Baird & Co. upgraded AutodeskÂ from perform to outperform; Bear Stearns & Co., looking at BEA Systems' positive cash flow, upgraded the company from underperform to peer perform. JP Morgan upgraded networking equipment maker CienaÂ from neutral to overweight, basing its decision on what it expects to be a faster-than-expected recovery on optical communications market. The bottom line is that demand for IT products worldwide, while not expected to equal the heady days of 2000, is by most indicators expected to grow consistently this year into next. The transition to Vista and spending on Web 2.0 services are expected to help spur user demand, according to analysts. "Barring any geopolitical issues that could arise, solid single-digit growth is expected in technology," said Jim Lanzalotto, vice president of Yoh Services in Philadelphia, a personnel and outsourcing firm. The IT job market is generally seen to be a prognosticator of the IT market. "When companies hire, it's because they see a need to put people in place for increasing demand," Lanzalotto noted. "We're dealing with the leading indicator of the leading indicators," Lanzalotto said. In technology, there is demand this year especially for basic product development specialists, CRM specialists (particularly in the health care fields), IT project management, and Java and .Net specialists, he said. High-end jobs requiring specialized skills are driving the IT job market overall, Lanzalotto said. Lower-end jobs and specialties such as help-desk services are expected to experience weak demand in the U.S. as these jobs get outsourced, Lanzalotto said, though the services sector globally appears to be stable. On the user-demand side, consumer spending in areasÂ like upgrades to Vista will be the main growth driver, Lanzalotto said.
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As earnings reports rolled in from technology bellwethers, including Microsoft, Apple, Nokia, and Motorola, worries about the economy continued to overshadow good news this week.The fourth quarter of 2007 was strong for IT sales, but a downturn in the U.S. economy, which many analysts fear is slipping into recession, is undermining investor confidence in the sector. Share prices of technology companies have dropped since the start of the year, with the Nasdaq Composite Index sinking to pre-2007 levels.Microsoft provided some cheer Thursday, reporting a strong quarter for core products such as Windows Vista and Office 2007. Revenue for the quarter increased 30 percent year over year to $16.37 billion.Just as important as many market observers fear the U.S. is entering a recession that will affect technology, Microsoft also raised its forecast for its fiscal year, which ends June 30. Noting that Office and video game sales are doing better than expected, the company said it expects revenue for its fiscal year in the range of $59.9 billion to $60.5 billion. Three months ago, the forecast was $58.8 billion to $59.7 billion.The report, however, provided only a momentary uptick in Microsoft shares and the Nasdaq, even though other news on the software front was good.Enterprise database vendor Sybase, for example, said Thursday that it had its first billion-dollar sales year in seven years, helped by a 15 percent jump in revenue for the fourth quarter to $295.2 million. What&#39;s more, its forecast for this quarter remains strong.&quot;We have a balance in our product portfolio and a balance geographically as well,&quot; said company Chief Marketing Officer Raj Nathan.Though Sybase has a stronghold in the financial vertical market -- a sector that is in trouble -- Nathan pointed out that the company is strong in the telecom arena as well, does about 50 percent of its business outside the U.S., and is developing new analytics products that will help financial companies manage risk and do program trading.The company was one of the few that ended the week on a happy note with its share price increasing by $0.56 to close Friday at $27.44.Other companies did not fare so well, as investors jumped on any scrap of bad news.&#160;Apple got hit hard even though it reported quarterly revenue of $9.6 billion, a whopping 35 percent year-over-year increase. Investors were spooked about slowing iPod sales and a weak forecast for this quarter. iPod shipments of 22.1 million were about 10 percent below what had been expected.Apple shares plunged, dropping from $161.36 last Friday to $130.01 this Friday.Motorola had a rough week, reporting Tuesday an 84 percent plunge in income for the fourth quarter&#160;to $100 million and warning that its market-share losses would continue as the U.S. market -- the company&#39;s cell-phone stronghold -- continues to slump until next year. Company shares dropped $2.27 to hit $10.05 Wednesday on the news, and stayed below $11 through the week.&quot;Management&#39;s view of [a] recovery being a 2009 event pushes the recovery further past the horizon most investors are willing to hear at this point,&quot; said Citigroup Global Markets in a research report.Nokia, with hit products and a strong presence in Asia, on Thursday reported a 44 percent rise in profit for the fourth quarter, to &#8364;1.84 billion ($2.7 billion), on a 34 percent sales increase. A slump in U.S. sales was more than offset elsewhere. Nokia shares jumped Thursday on the news, rising $4.05 to close at $36.48 -- and then fell right back down Friday after IDC issued a report that suggested Nokia&#39;s confidence in 2008 was misplaced.In an economy that has investors focusing on the bad news, it&#39;s going to take some evidence of strong sales in the current quarter to bring confidence -- and tech share prices -- back up to where they were. The Nasdaq finished 2007 up by 9.8 percent, but in the first four weeks of this year, last year&#39;s gain has been wiped out with the index closing Friday almost 300 points down from the end of December.
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Stock investors may want to fasten their seatbelts for the week ahead, when a flurry of  earnings and economic data will once again be in focus.
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(InfoWorld) - With shares of major technology companies trading as high as they have ever done in the post dot-com era, IT investors this week are scrutinizing quarterly results from the world's biggest vendors to judge how the market will hold up for the rest of the year. Market analysis firms started off the year predicting an overall global annual IT spending increase of about 6.5 percent, so no one was expecting technology vendors to experience growth at the heady rates of the late 1990s. But even as competition squeezes profit margins, results overall point to a healthy 2007. In the hard-fought Internet services arena, product development and customer acquisition costs remain high, but Google continues to show skyrocketing growth. Thursday, it reported thatÂ second quarter net income rose 28 percentÂ from a year earlier to hit $925.1 million as revenue, minus traffic acquisition costs, surged by 63 percent to reach $2.72 billion, above the average forecast of $2.68 billion by analysts polled by Thomson Financial. In the chip sector, Intel reported Tuesday that even though gross margins on product sales shrank,Â profit for the second quarter increasedÂ 45 percent from last year to $1.3 billion. Company officials said that revenue for the third quarter would be $9.0 billion to $9.6 billion, beating its previous forecast. IBM also raised its earnings forecast for the rest of the year Wednesday and reported thatÂ second quarter results were its best in six years. Net profit was $2.3 billion, up 11.8 percent increase from a year earlier, on revenue of $23.8 billion, up 9 percent. In software, Microsoft was upbeat about its core business Thursday. Though it faces a mature market for its cash-cow products, it said sales of operating systems, server software and tools fueled a 7.3 percent rise in net income asÂ revenue rose 13 percent to $13.38 billion. Both profit and sales beat Wall Street estimates. However, companies like Motorola reminded investors that in an era of moderate growth, not everyone can win big. Two days after announcing it would restructure operations, the handset maker Thursday reported that disappointing sales of mobile devices led to aÂ second-quarter loss of $28 million, down from net income of $1.38 million a year earlier. Product design has become a crucial issue as the North American and European markets mature. Yahoo, meanwhile, suffered in the Internet services market,Â reporting Tuesday thatÂ net income for the quarter was $161 million, down from $164 million one year earlier. Yahoo also lowered its earnings guidance for the rest of the year. Despite disappointing results in some of the harder-fought areas of IT, overall earnings news and guidance for the rest of the year, coupled with the latest reports on customer spending, suggest that 2007 could end up being one of the brightest years in the wake of the dot-com bust. The tech-heavy Nasdaq stock market index hit six-and-half year highs this week and last, and customer spending seems to be exceeding forecasts. Results of the quarterly CIO Magazine Tech Poll published earlier this month, for example, indicate improved IT spending forecasts with respondents predicting increases of 7.2 percent over the next 12 months, versus estimates earlier this year of an average 5.1 percent increase.
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Stocks edged up for the week, continuing a month-long rally in the face of mediocre economic news and more-positive developments from technology firms and energy markets.
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NEW YORK: US stocks ended slightly higher on Friday, helped by strength in technology after bellwether Intel Corp lifted its sales forecast, although a weak jobs report put a damper on Wall Street.
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Some say indexes dropped Thursday because investors are idling until some good news comes around. Maybe so, but the trading volume of the Nasdaq-100 tracking stock, which we use to get a better feel for how individual tech shares are selling, ...
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Most U.S. companies have reported earnings and the flow of economic data slows this week, so investors will look to U.S. trade figures and earnings from leading technology stocks Dell and Cisco for fuel to sustain the market's 2-week-old rally.
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Despite financial market volatility, U.S. technology companies had a strong 2007. The rising cost of energy, fears of recession, and forecasts of a slowdown in IT spending, however, point to a rocky 2008.
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(InfoWorld) - Mergers and acquisitions and several strong financial reports excited IT investors this week, even as concerns about the U.S. economy continue to roil the stock market. The U.S. Federal Reserve Board decision Tuesday to cut interest rates gave a temporary boost to stock exchanges and benefitted bellwether IT companies, such as Google, Research in Motion, and Dell, which all posted share gains after the Fed's move. Since mid-quarter, investors have dumped shares, including those of IT vendors, as concerns about the faltering U.S. housing sector, mortgage payment failures, and related worries about the credit market have grown.The Fed's move was meant to allay worries about a potential tightening of credit, which is often expected to dampen business and consumer spending. But economic concerns have not appeared to slow the pace of M&A among IT vendors themselves. For example, to expand its foothold in the U.S.,Â T-Mobile announced Monday that it will buy SunCom WirelessÂ for $2.4 billion. SunCom Wireless jumped $3.65 to close at $25.65 after the announcement. Yahoo also helped the week start off with a bang, announcing a $350 million acquisition in the hot software-as-a-service market.Â Yahoo is buying Zimbra, which offers a hosted collaboration and messaging software suite. Yahoo shares closed Monday at $24.95, up by $0.22. There were a host of other M&A news, including Monday's announcement by InfoSpace, that it would sell its Switchboard.com online directory business for $225 million to Idearc, a print and online directory publisher. InfoSpace shares soared $4.13 to close at $17.38 on the news. Meanwhile Leap WirelessÂ rejected an unsolicited buyout offer from cell phone rival MetroPCS, saying the $4.7 billion bid underestimates Leap's growth potential. Generally, M&A news boosts investor confidence because it is taken as a sign that the vendors themselves are certain enough about new technology to bet big on it. Other good news this week came from software bellwetherÂ Oracle, which Thursday announced that strong database, middleware and services revenue helped bring net income for its first fiscal quarter to $840 million, a 25 percent jump from the year-earlier period. In the hardware arena, Best BuyÂ reported Tuesday that due in part to strong sales of computers, net income rose to $250 million for the quarter ended Sept. 1, compared with $230 million a year earlier. Gartner offered more good news for hardware, predicting in a report Thursday that lower prices and the improved performance of laptops will fuel continued growth in PC sales. Worldwide PC shipments will grow 12.3 percent this year, Gartner said.
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By Tom Walker, The Atlanta Journal-Constitution  Feb. 6--A six-session rally by the Nasdaq composite index ended Monday on  weakness in the technology sector. Investors generally treaded water after  recent market gains, fueled in part by double-digit corporate profit growth.
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WALL Street&#39;s broad market indicators ended nearly flat today after an early rally attempt ran out of steam, but tech stocks held on for solid gains.
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Technology stocks looked set to rise on  Wall Street on Friday following Microsoft's  earnings  after Thursday's bell, while concern about earnings and the  economic outlook would likely weigh on blue chips.
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A weak forecast from Cisco marked another roller-coaster week for technology companies on the stock market.The Nasdaq, home to many tech companies, suffered a gut-wrenching 3.1 percent drop Tuesday after a U.S. service sector report showed a decline in the nonmanufacturing index from December to January. Though the index recovered somewhat during the rest of the week, the Tuesday drop was yet another demonstration that IT investors are worried that a broad economic slowdown will affect technology. The decline in the nonmanufacturing sector was the first such drop since the beginning of 2003.Cisco&#39;s earnings report&#160;on Wednesday reinforced concerns that the broader economy will have an impact on IT. Cisco forecast revenue for its current fiscal quarter to increase 10 percent, compared to analyst consensus expectations of 15 percent, according to Thomson Financial. On a conference call with analysts, CEO John Chambers said the upcoming quarters will be &quot;extremely challenging.&quot;Confirming fears of market watchers, he also noted that &quot;we are seeing our U.S. and European customers becoming increasingly cautious.&quot;However, sales for the fiscal quarter ending Jan. 26 were up by 16.5 percent to $9.8 billion. The company has been saying for some time that it will sustain double-digit growth through the rest of the decade by incorporating data, voice, video, and mobile capabilities -- its &quot;quadruple play&quot; -- across product lines.Despite the muted forecast, market watchers still have faith in the company. Company shares rose slightly the day after the report, closing at $23.38, up by $0.30.The &quot;quadruple play&quot; pitch still resonates with analysts, and several company watchers noted that Cisco shares have declined along with the wider market over the last few months, giving it a good valuation for long-term investors. Pacific Crest analyst Tim Daubenspeck upgraded the stock to &quot;Outperform&quot; from &quot;Sector Perform.&quot;&quot;Ultimately, we believe that many of the drivers are firmly in place for Cisco to achieve its long-term growth forecast of 12 percent to 17 percent,&quot; he said in a research note.Chambers&#39; cautious forecast, however, could have a bad effect on its suppliers and customers, including electronics manufacturing services and telecom companies. On Thursday, Qwest Communications dropped $0.29 to close at $5.27, Sprint Nextel declined by $0.6 to close at $9.56, and Nortel Networks dropped $0.55 to $10.99.In other telecom-sector news,&#160;Alcatel-Lucent&#160;on Friday said revenue for its fourth quarter increased 18 percent to $7.61 billion. The company, however, suffered a net loss of $3.76 billion, mainly because of a writedown related to the shrinking value of assets from Lucent. Company shares declined by $0.29 to $5.96 in midafternoon trading.Citigroup Global Equity Research said that the Cisco forecast does not bode well for electronics manufacturing suppliers. &quot;Simply put, this is not good news for EMS [electronics manufacturing services] companies,&quot; wrote Citigroup&#39;s Jim Suva in a research note.Such companies include Jabil Circuit, Celestica, and Smart Modular Technologies, he noted.In other technology sectors, Time Warner&#39;s plans to&#160;split up the Internet access and audience businesses of its AOL unit, reiterated by CEO Jeff Bewkes Wednesday, gave a temporary boost to Time Warner shares. Time Warner wants to grow AOL&#39;s ad-supported audience business, including online services and content.The company had said before that it would at some point run the two businesses as separate entities, to better focus on the advertising business. Nevertheless, company shares rose $0.31 Wednesday to close at $15.71.But the company has an uphill battle. In the fourth quarter, AOL&#39;s ad revenue increased 18 percent, less than the 25 percent industry average. And it faces not only Google, but a potentially strengthened Microsoft, if its&#160;bid to buy Yahoo&#160;succeeds.
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The tech giant gives a strong outlook on the back of booming international sales
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More than a few companies that you know -- and possibly own -- will be reporting earnings in the week ahead.