Earnings keep IT stocks volatile

Mixed financial results from leading IT companies buffeted the market this week. Disappointing fourth-quarter reports from bellwethers Intel Corp. and IBM Corp. shook investor confidence last week, leading to a big sell-off of stocks and a drop in markets, including the Nasdaq. This week, shares of IT companies recovered somewhat, but prices have been volatile as investors scramble to sort through data.

Software heavyweights weighed in this week, with Microsoft Corp. Thursday reporting record quarterly revenue of US$11.84 billion, up 9.4 percent from one year earlier. Strong server and tools sales helped the quarter, though costs associated with, among other things, the launch of the new Xbox kept operating income to $4.66 billion, down 2 percent from one year earlier.

Company guidance is cautious: Sales in the current quarter, ending March 31, are expected to range to a high of $11.2 billion, with earnings per share (EPS) of $0.32 or $0.33. Analysts were forecasting EPS of $0.33 and sales of $10.99 billion. Despite the wary forecast, Microsoft shares (ticker symbol: MSFT) moved up by $0.48 to $26.98 in after-hours trading. With the Vista operating systems on the horizon, this could be a big year for Microsoft. Despite revenue growth, its stock has been languishing for the past few years as investors see traditional markets mature.

Mergers and acquisitions is one sign of a mature market, but apparently Oracle Corp.’s consolidation at the high end of the ERP market has done no harm to SAP AG. SAP Wednesday reported one of its best years ever and forecast strong 2006 sales growth of between 15 percent and 16 percent. Net income for the quarter ending in December was €619 million (US$733 million), up 14 percent from the fourth quarter of 2004. SAP Chief Executive Officer Henning Kagermann said that on the high end, customers are starting to buy into the NetWeaver integration platform, while smaller users are taking up SAP efforts to offer affordable midmarket packages. SAP shares (SAP American depository shares symbol: SAP) jumped by $4.25 Wednesday to close at $49.70.

Also on the software front, CA Inc. on Tuesday reported quarterly profit that nearly doubled from the same period in 2004. CA’s net income for the quarter was $56 million, up from $31 million during 2004’s third quarter. But it’s apparently going to take more than that to calm investors, as the company’s new management team tries to shrug off the specter of accounting scandals that tainted the old management team led by former CEO Sanjay Kumar. CA shares (CA) fell by $1.15 to close at $27.73 Wednesday.

Sun Microsystems Inc. Tuesday reported that demand for x64 Sun Fire servers helped boost quarterly revenue to $3.34 billion, up from $2.84 billion one year earlier. However, the company still lost $233 million due to a variety of charges. Though Sun has made a variety of moves to generate sales, such as offering systems with Linux software and Intel chips, investors are still waiting to see the company make a profit. Its share price has languished, and the financial results bumped up the stock (SUNW) by just $0.07 to close at $4.44 Wednesday.

Data-storage leader EMC Corp. said Tuesday that quarterly profit tumbled due to charges including costs of its acquisition of Captiva Software, but sales of network-attached storage devices helped boost revenue to $2.71 billion, up 15 percent. It was the 10th consecutive quarter of revenue growth, a record quarter and a record year –$9.6 billion in revenue in 2005. Investors boosted shares (EMC) by $0.39, to close at $13.65 Wednesday

Meanwhile, Apple Computer Inc. CEO Steve Jobs’ ability to drive innovation at companies he manages got another vote of confidence when The Walt Disney Co. Tuesday announced the expected acquisition of Pixar, the animation studio that Jobs leads, for $7.4 billion. Jobs, who owns 50.6 percent of Pixar stock, will be on Disney’s board of directors. Pixar (PIXR) shares Wednesday rose $0.45 cents to $58.02.