Wall Street Beat: RIM, Oracle, Spending Buoy Markets
Better news about the economy and online spending capped off by strong quarterly results and robust forecasts from Oracle and Research In Motion helped fuel markets this week to new highs.
The Nasdaq, home to a critical mass of IT vendors, hit its highest intraday peak in two years Thursday. It ended up closing at 2637.31, just 0.23 points away from last Friday's close, which was the highest this year so far. Computer stocks were up 16.7 percent for the year.
The broader Dow and S&P indexes hit highs for the year. The stock market stars of the week, Oracle and RIM, continued to climb Friday morning. In early trading, Oracle was up US$1.76 at $32.03, and RIM was up $1.65 at $60.89.
After getting bogged down by fears of a double-dip recession, markets have been on the upswing since September, led by tech companies. Though concerns related to unemployment, the housing market and national debt in the U.S. and Europe continue to shade optimism, robust earnings by IT companies have indicated that consumers and businesses are spending on technology.
Enterprise spending has been particularly strong. Oracle was one of the tech bellwethers that sparked the market rally in September when it announced a 48 percent jump in sales and a 20 percent spike in profit. Another was RIM, a company in the mobile arena but with a stronghold among business customers that use the BlackBerry and its corporate-friendly e-mail service. RIM reported a 31 percent revenue increase and a 67 percent rise in profit.
The big question has been whether the jump in vendor results last quarter was a result of a pent-up demand from the recession that would exhaust itself. Adding to this concern was a report from Cisco last month of a slowdown in spending on the part of public administrations. In the U.S., government entities are being hit as stimulus spending dries up.
A slowdown in consumer spending for PCs has also been expected. Gartner recently cut forecasts for PCs due to concerns that economic uncertainty would dampen demand. Worldwide PC shipments are on pace to total 352.4 million units in 2010, a 14.3 percent increase from 2009 but down from earlier estimates of 19.9 percent growth, Gartner said.
But neither RIM nor Oracle disappointed Thursday. tString := StoryDateLine + " (" + @Text(StoryFiledDate) + ") - "; @If(datelineinbody = "No"; tString; "")Oracle said its profit for the quarter ending Nov. 30 rose 28 percent from a year earlier to $1.9 billion, while revenue was $8.6 billion, a jump of 47 percent.
Looking ahead, Oracle sees the current quarter revenue rising 32 percent to 36 percent over last year, to $8.45 billion to $8.71 billion, higher than the $8.41 billion forecast by analysts polled by Thomson Reuters. Profit is expected to be $0.48 to $0.50 cents per share, excluding items, higher than the $0.46 per share that analysts predicted.
Fueled by a 40 percent jump in smartphone shipments, RIM said that revenue for the three months ending Nov. 27 jumped 40 percent from the year-earlier quarter to $4.62 billion. The company's net income for the quarter was $911.1 million, 15 percent higher than a year earlier.
For the quarter ending in February, the company projected earnings of $1.74 to $1.80 per share on revenue of $5.5 billion to $5.7 billion, topping estimates by analysts, who had been forecasting $1.61 per share and revenue of $5.46 billion.
"This report shows they are doing a good job of hanging on to their customers," said industry analyst Jeff Kagan in an e-mail note. "Does this also show growth to new markets? We have to hear more from RIM on this."
To attract new users, RIM appears to have high hopes for the PlayBook tablet, expected to go on sale at the end of the first quarter.
Tablets are set to grow in the enterprise market as well as the consumer market, according to a new report from ChangeWave this week. "While 7 percent of business respondents say their company currently provides employees with tablet devices, an astonishing 14 percent of businesses report their company will be buying tablets in 1st Quarter 2011," the company said.
Consumer spending and the jobs front also offered some good news this week. ComScore reported retail e-commerce spending for the first 40 days of the November -- December 2010 holiday season increased 11 percent from last year, to $5.15 billion.
On Thursday, the Labor Department reported that 3,000 fewer people applied for first-time unemployment benefits last week, while the four-week average of claims dropped to 422,750, the lowest level since August 2008, just before the collapse of Lehman Brothers and the Wall Street crash that October.
However, although tech companies were on the upside Friday morning, it's clear that economic problems linger. The Dow pulled back a little from its high close, as fresh concerns about European debt arose due to a downgrade of Irish government bonds. The scenario seen this year -- remarkable vendor sales but general unease about the economy -- is not likely to end anytime soon.