Wall Street Beat: Tech earnings fuel optimism

Financial results from key vendors such as Microsoft, Apple, and Amazon.com this week have pushed the tech-heavy Nasdaq to its highest point in more than six years, and helped fuel the Dow Jones Industrial Average of big companies to 13,000, a record mark.

The Nasdaq has risen 5.5 percent since the beginning of the year. General optimism has not floated everyone’s boat, though: Investors are giving high marks to companies that are showing creativity in business and product strategy, but have been quick to jump on missteps.

Microsoft Thursday announced a strong quarter, driven in part by early demand for Windows Vista and the Microsoft Office 2007 suite. Revenue for the quarter ending March 31 rose from $10.9 billion last year to $14.4 billion, while income increased from $2.9 billion last year to $4.9 billion this year. Better yet, the company’s forecast for the fiscal year, a range of $56.5 billion to $57.5 billion, is a nice surprise for analysts, who have been forecasting $50.5 billion, according to Thomson Financial. The company’s share price immediately started climbing in after-hours trading.

Investors rushed to buy Apple shares Thursday, lifting its share price to above $100 for the first time after the company Wednesday announced quarterly earnings. Strong sales of both Macs and iPods boosted profit by 87 percent from a year ago, to $770 million.

The numbers seemed to blow away any possible concerns about ongoing state and federal investigations against officials, including CEO Steve Jobs, regarding false documentation for stock options granted to executives. The company has built up tremendous goodwill with a creative and aggressive product strategy: innovation of its groundbreaking iPod line, a gutsy move to Intel chips, and its upcoming iPhone.

Citigroup Global Markets Thursday downgraded its rating on Apple from “buy” to “hold,” but only because analysts there believe that shares are so high they won’t go up much more in the near term, given that the company is heading into a quarter that traditionally sees slower sales, and also because any boost that the iPhone may give the company has already been included in investor forecasts.

Amazon.com shares skyrocketed Wednesday and continued to move up during the week, after the online retailer announced a net sales increase of 32 percent, leading to a 115 percent hike in profit, to $111 million. Analysts are liking how Amazon has wooed third-party retail providers to do e-commerce on the site. Brokerages including Cowen & Co. and Citigroup upgraded their ratings on the company.

IT investors, however, were quick to pounce on Sun Microsystems after it reported earnings Tuesday. The company reported profit of $67 million for the quarter, compared to a net loss of $217 million last year. But CEO Jonathan Schwartz said sales growth was hurt by a poor performance in the United States and the United Kingdom, and CFO Michael Lehman forecast revenue for the next quarter to rise between to $3.78 billion to $3.87 billion. This was less than the $4 billion expected by analysts, leading several to believe that Sun server sales are not going as well as has been expected. Sun shares dropped to close at $5.94 Wednesday from $5.27 Tuesday, and continued down during the week.

In a year where only moderate global growth in IT is expected, there are bound to be some vendors who will lose out. Any weakness in a company’s forecast is likely to meet a swift reaction.