HP, RIM, Cisco shed light on dark mood

Good news about Hewlett-Packard, Cisco, and Research in Motion did not do much to help IT investors’ moods during another turbulent week in the markets.

Despite the macroeconomic gloom, some major IT companies continue to come through with solid sales reports and remain optimistic about the next few months. The good news caused some spikes in tech-vendor share prices, but overall, IT investors remain nervous.

HP on Tuesday reported that revenue for the quarter ending Jan. 31 was $28.5 billion, an increase of 13 percent above the same period in 2007. PC sales and strong business outside of the U.S. fueled sales. Profit excluding certain one-time items was $2.3 billion, up from $1.8 billion in 2007. Both sales and net income beat analyst forecasts.

HP had more good news about the current quarter. It expects second-quarter revenue of $27.7 billion to $27.9 billion and EPS (earnings per share) of $0.83 or $0.84, excluding one-time items. Again, both figures exceeded forecasts by analysts polled by Thomson Financial, who expected EPS of $0.82 and sales of $27.4 billion. The news from HP, the largest IT company in the world, sparked a brief rally among tech stocks. Shares of HP rose $3.52 to $47.47 Wednesday.

Cisco shares also got a boost this week. On Wednesday, Citigroup upgraded its rating on Cisco shares from “hold” to “buy.” Though Citigroup acknowledged a potential slowdown in IT spending, Cisco’s strong hold in data, voice, video and mobile product categories put it in a good position.

“The consumer-led downturn will be less sharply felt in tech versus 2001-’02 — with tech recovering first,” said Citigroup Global Markets Equity Research analyst Paul Mansky. “We find our bias shifting to companies that enjoy duopolistic competitive dynamics, have a global reach and can scale the business without having to build new channels.” Networking giant Cisco fits that description, Mansky wrote. Cisco shares rose by $0.35 Wednesday to close at $23.55.

Bucking the downward trend in the stock market on Thursday, RIM shares gained $8.78 to close at $106.69, on the strength of subscriber growth expectations. The company, which has suffered two outages in as many weeks, forecast an increase in subscribers of 15 percent to 20 percent higher than prior expectations. RIM cited strong sales of BlackBerry devices during the holiday season. The company will report fourth-quarter earnings on April 2.

Meanwhile, fears of recession continue to have an overall impact on share prices of IT vendors, despite reports of strong sales by major technology bellwethers. This week, high oil prices and glum reports on the economy roiled the tech-heavy Nasdaq Composite Index in the wake of the President’s Day market holiday Monday.

The Philadelphia Federal Reserve on Thursday reported the biggest regional manufacturing slowdown in seven years, while oil prices remained above $100 per barrel for several days in a row. IT investors fear that a U.S. economic slowdown will dampen spending on technology. A ChangeWave Research study on Wednesday underscored these concerns. The poll of 2,013 people involved with IT spending in their organizations reported that 23 percent said their companies will reduce or halt IT spending in the second quarter.