Wall Street Beat: Strong results reassure IT

Strong quarterly results from bellwether companies in software, telecommunications, storage, and even hardware this week went a long way toward easing concerns of IT investors, who were hit by a series of earnings warnings earlier in the month.

Though Microsoft’s net income for the quarter ending in December fell 28 percent compared to one year earlier, due to the transition to Vista, it did better than analyst expectations and raised its forecast for the next few months. Thursday the company reported revenue of $12.54 billion and $0.26 earnings per share, compared to analysts’ forecasts of $12.1 billion and $0.23 per share. Looking ahead to Vista and Office sales, it now it predicts earnings per share of $1.45 to $1.47 for the fiscal year ending in June; previously it had predicted earnings per share of $1.43 to $1.46.

Sun Microsystems provided a high point Tuesday, especially heartening because bad news has tended to come from the hardware arena, which is under tremendous competitive price pressure. Sun said that strong sales of x64 servers based on Advanced Micro Devices chips were a big reason for a profit of $126 million, or $0.03 per share, for the quarter ending in December. Analysts polled by Thomson Financial had expected $0.01 per share.

Despite concerns about price pressure on telecommunications, AT&T on Thursday reported a 17 percent increase in profit due to wireless revenue. Net income came in at $1.9 billion, up 17.1 percent over the same period in 2005.

EBay and Yahoo gave assurances that business is brisk in the online world. EBay on Wednesday reported a 24 percent increase in fourth-quarter profit, and attributed the growth to core auction, PayPal and Skype businesses. Helping to allay fears about the year ahead, it forecast annual operating income of up to $1.29 per share, well ahead of the $1.23 analyst forecast.

Yahoo on Tuesday reported net income, excluding certain one-time items, of $229 million, or $0.16 per share, beating expectations of $0.13 per share. Its Project Panama, a new way of ranking search results combining paid ranking and search result algorithms, is getting good feedback.

“We maintain a favorable view of Yahoo’s strategy to maximize engagement and optimize monetization, its new organizational structure, its key priorities, and its recent progress on Project Panama, which we believe has long-term benefits,” Goldman Sachs Group analyst Anthony Noto said in a research note.

Storage and security vendor EMC reported record revenue for its fourth quarter on Tuesday, fueled by growth in its RSA security division, and more generally, double-digit growth across systems and software offerings globally. Net quarterly profit was $389 million, while earnings excluding one time items were $0.17 per share, edging out the $0.16 per share forecast by analysts.

EMC’s report is particularly good news in light of a poor performance and forecast from rival Symantec.  Security and storage have been seen as linchpins of IT growth so bad news from both companies would have been a bad sign for the year. Symantec on Wednesday reported earnings of $0.12 per share, compared to earlier forecasts in the range of $0.14 or $0.15. The company said it would lay off staff as part of plans to cut $200 million in expenses.

Other bad news this week came from AMD, which Tuesday reported a fourth-quarter loss of $574 million, down from a profit of $96 million for the same quarter last year.

Both AMD and Symantec had previously issued earnings warnings, so their results were expected. The major surprises of the week have so far been on the upside.

Share prices increased for most of the companies reporting good results and market indexes soared until Thursday, when worrying macroeconomic news about home sales declines and unemployment increases were reported by the National Association of Realtors and the U.S. Labor Department, respectively.

Nevertheless, the good tech results helped buoy confidence. Despite the overall Thursday market decline, gains during the previous days have kept the Nasdaq — home to many IT vendors — on track with close to 5 percent growth over the last three months.