Wall Street Beat: Earnings show some strength

IT investors were awash in data this week as leading technology companies reported quarterly earnings. The results from the bellwethers were a mixed bag, but underlying strength in several sectors came through.

The Internet arena was in the spotlight as Google Inc., eBay Inc. and Yahoo Inc. all reported. Google results were especially strong, as the company Thursday reported quarterly profit of $381.2 million, or $1.32 a share, compared to year-earlier earnings of $52 million, or $0.19 a share.

The company reported after the market closed, after shares in Google (GOOG) closed at $303.12, down $5.38 for the day. The decline may have been due to the fact that Google had tried to downplay expectations, however. Once the numbers are analyzed investors may find comfort in the results, which appear to bolster optimistic analyst forecasts that the company can maintain its lead in the search field, and as a result, keep its high share price up. In fact, first indications in after-market trading were that company shares were starting to trade higher.

Online auction leader eBay Inc. scared investors even though Wednesday it reported a strong quarter, with net revenue of $1.106 billion, up 37 percent compared with the year-earlier quarter. Though the company’s forecast for the rest of the year includes higher-than-expected sales, profits will be less than forecast because of the company’s $4.1 billion acquisition of Internet-phone company Skype Technologies. Many analysts question whether the buy of Skype will enhance the company’s core business, especially at a time when competition in the VOIP (voice over IP) market is heating up. Thursday, company shares (EBAY) dropped by $2.94 to close at $39.07

On Wednesday, on the other hand, Yahoo Inc. shares (YHOO) jumped by $2.21 to $35.91 after the Internet search company reported third-quarter earnings that were better than analysts expected, due to an almost 50 percent increase in revenue. Income was $0.16 per share, beating by $0.02 the forecast of analysts polled by Thomson First Call.

One worrying sign during the week was Intel Corp.’s forecast for the current quarter, announced Tuesday when it released its results. Though the quarter was strong, with both earnings and revenue up from the year-earlier period, its forecast for the current quarter was for sales of $10.2 billion to $10.8 billion. The range’s median is under what analysts surveyed by Thomson First Call expected. Intel closed at $23.69, down $0.03, on Wednesday.

Intel cautioned that PC makers may have overbought chip supplies. Offsetting that, however, were several pieces of good news. One was that Intel said margins would improve in the current quarter. An expected margin crunch was one reason that several analysts had downgraded Intel and the whole chip sector recently, so the statement about the company’s gross profit margin should alleviate some concerns.

Secondly, both IDC and Gartner Inc. released PC market reports at the beginning of the week that showed surprisingly strong growth in the PC market during the third quarter. Both firms, reporting independently, said global shipments of PCs increased more than 17 percent. The companies said that PC adoption and replacement activity spurred sales, with home demand for mobile devices being particularly strong.

IBM Corp., which sold its PC business last year to Lenovo Group Ltd., Monday reported quarterly income from continuing operations of $1.5 billion, down slightly from $1.6 billion in the third quarter of 2004. However, the decline was mainly due to a one-time tax charge, and overall it sold more non-PC hardware and services than it did in the year-earlier period. Excluding the tax charge, the company earnings were $1.26 per share, beating the $1.13 per share consensus estimate of analysts polled by Thomson First Call.

Shares of the IBM (IBM) rose 89 cents to $83.48 Tuesday.

REFERENCES: Intel posts strong Q3 earnings, Oct. 18, 2005 IDC, Gartner find Q3 PC shipment increases, Oct. 17, 2005 IBM income down slightly from Q3 2004, Oct. 17, 2005 EBay revenue and earnings grow in Q3, Oct. 19, 2005