Google, Intel, Nokia boost sector hopes

Earnings season is in full swing, and results this week from bellwethers like Google, Intel, and Nokia are fueling hopes for a strong fourth quarter while confirming the investor confidence that has led to a rebound in share prices of technology vendors.

All eyes were on Google, which Thursday reported another stellar quarter. For the third quarter, net income was $1.07 billion compared with $733.4 million a year ago. Revenue leaped 57 percent to $4.23 billion. The company has made some investors nervous by expanding rapidly and spending a lot of money on acquisitions to fuel growth in new areas. However, its core search business manages to ward off the competition. Google shares jumped $6.14 to $639.62 right after its announcement.

Google archrival Yahoo reported a 4.6 percent decline in third-quarter profit compared to a year ago Tuesday, but revenue climbed 12 percent to $1.76 billion. Company executives said they were weeding out poorly performing services and enhancing efforts in promising areas like ad-supported music services and e-mail offerings to small businesses. The company is also expanding efforts to support third-party developers with open APIs.

Even though Yahoo has been blasted for its failure to steal search ad revenue from Google, investors and analysts appear to like its strategy. Citigroup maintained a “buy” rating on the company while RBC maintained an “outperform” rating. Yahoo shares jumped $2.13 to close at $28.82 the day after the report.

The market might be tougher on Internet retailers. eBay reported Wednesday that revenue climbed 30 percent but that it suffered a loss because of a $1.39 billion charge for its acquisition of Internet phone pioneer Skype. Although the company raised its 2007 revenue target, investors apparently did not like the charge for Skype, which failed to make revenue goals. Shares of eBay lost $2.50 to close at $38.10 Thursday.

In one of the most-anticipated results of the week, Intel got the earnings season off to a good start Tuesday, reporting revenue of $10.1 billion, a 15 percent increase year-over-year, while achieving net income of $1.9 billion, a whopping 43 percent increase. The price competition in the market is tough, but a jump in sales and a restructuring effort appears to be paying off. Intel jumped $1.24 to close at $26.72 the day after the report.

AMD did not handle the price competition so well, however. Though it registered a 23 percent rise in sales, it posted another loss. Thursday, AMD reported that its net loss was $396 million, compared with a profit of $136 million in 2006.

Reaction to IBM results were mixed Tuesday, when it reported profit of $2.36 billion, compared to $2.22 billion a year ago. Revenue was $24.1 billion, a 7 percent increase from last year. Though the numbers were better than expected, a disappointing 10 percent slip in hardware sales worried investors, who pushed down IBM shares Tuesday by $3.82 to close at $115.78.

Nokia managed to offset declining prices of handsets with a jump in sales. Thursday it said that for the three months ending Sept. 30, net profit increased 85 percent over the third quarter of 2006, while sales rose 28 percent. Nokia shares closed Thursday at $37.64, up by $1.11.

Concerns about the U.S. economy — because of a declining housing market and an increase in mortgage defaults — caused shares to tumble in July and August. But judging from results this week, IT vendors were not hard hit during the quarter and investors are likely to have high expectations for the rest of the year.