Wall Street Beat: Earnings cloud hopes

Though some technology bellwethers such as Google Inc., Apple Computer Inc. and IBM Corp. provided bright spots this week, financials reports from heavyweights such as Advanced Micro Devices Inc., Intel Inc. and EMC Corp. clouded prospects for the tech sector for the rest of the year.

This week, Google Inc. as usual was a star. On Thursday the company reported profit of $733.4 million, compared with $381.2 million one year earlier, a sign that it is consolidating market share. In after hours trading, company shares (GOOG) shot up by $25 within 45 minutes, to the $451.00 level.

But quarterly financial reports this week contained some disappointments.

Storage giant EMC on Tuesday said third-quarter earnings declined by 33 percent from a year earlier, and unveiled a reorganization plan that includes about 1,250 layoffs. The big disappointment here is that storage has been consistently seen as a bright spot. Trader reaction was swift. Company shares (EMC) closed Tuesday at $12.50, down by $0.13.

In the chip market, rival heavyweights Intel and AMD both weighed in. Fueled by sales of its Core Microarchitecture chips for notebook PCs and servers, Intel Tuesday reported quarterly profits of $1.3 billion, higher than analyst estimates but more than 30 percent lower than earnings one year earlier. Reaction was mixed. Intel shares (INTC) Wednesday climbed $0.21 to $21.11, but then dropped back on Thursday, to $21.06. On Tuesday Goldman Sachs downgraded its Intel rating from “buy” to “neutral.” Though chip vendors are doing better than expected, a price war is putting a limit on how well analysts think companies can do this year.

A case in point is AMD. Though the company, reporting Wednesday, beat analyst estimates with net income of $134 million, J.P. Morgan downgraded AMD to “underweight” from “neutral,” citing concerns about prices. AMD (AMD) shares plunged Thursday, dropping $3.22 to $21.01.

News from Apple, on the other hand, was fairly good, though not without some shadows for the near term. Apple said Wednesday that iPod and Macintosh sales helped push up quarterly profit by 27 percent from one year earlier, to $546 million. On Thursday, company shares (AAPL) skyrocketed to $78.99, up $4.46. Nevertheless, there are concerns about Apple’s options-backdating accounting problems.

In one of the week’s real bright spots, IBM Tuesday reported a strong quarter, saying net income rose a whopping 46.5 percent from a year earlier to $2.2 billion. Chief Financial Officer Mark Loughridge said the company is in a great position now, with software, hardware and services revenue well-balanced. After closing at $86.71 Tuesday, IBM shares started taking off, closing at $89.86 Thursday.

Hopes for a strong finish to the year have been rising. The Dow Jones Industrial Average has been breaking records of late, buoyed by strong U.S. retail sales, low interest rates and a respite from rising energy prices. But the broad-based Nasdaq, on which many IT companies are traded, is a much better indicator for the tech sector. After taking a dip in the third quarter, the Nasdaq Composite Index started rising steadily into mid-October, surpassing the year’s starting point. But Google and IBM results notwithstanding, the somewhat spotty news from the tech sector this week suggests that the sector won’t have an easy climb for the rest of the year.