Wall Street Beat: Some Companies Shine Amid Gloom

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When Samsung Electronics, a giant in chips, mobile phones and LCD panels, reported earnings on Friday, it noted worsening business conditions and said its results could have been better were it not for falling demand for IT products and the general slowdown in the global economy.

Other companies, including Samsung's biggest rival in South Korea, LG Electronics, as well as U.S. technology giants Google, Microsoft and Texas Instruments, have also noted more difficult business conditions. High energy prices have sent the price of gas, electricity and other necessities soaring, crimping consumer demand. And people everywhere are feeling the effects of the credit crisis.

But considering Samsung posted a 51 percent year-on-year net profit increase, perhaps the company was talking about its rivals feeling the economic pain, and didn't mean itself.

Qimonda AG, for example, a competitor of Samsung's in the DRAM market, reported a net loss of €401 million (US$628.7 million) in the quarter ending June 30, its fifth straight quarterly loss. Qimonda blamed a 45 percent decline in average selling prices, in part, for the loss.

The DRAM market has been in the doldrums since late last year amid a glut of the chips, and most companies in the sector have been posting massive losses.

Not Samsung. The world's largest DRAM maker reported a slim 270 billion Korean won (US$268.4 million) profit in its chip division. Although the division includes more than just memory chips, memory makes up the bulk of Samsung's chip sales.

The South Korean giant also improved in mobile phones. Samsung sold 45.7 million handsets in the second quarter, up 22 percent compared to the same time last year. The company has been widening its lead over Motorola ever since snatching second place from the U.S. company in the third quarter of last year.

Judging by Motorola's stock price, few people expect it to make a comeback anytime soon. Motorola's stock fell to US$7.15 per share on Thursday, down 55 percent so far this year. The company will report second quarter earnings next Thursday.

Amazon.com is another company shining amid the downturn and company executives feel the economic troubles are actually helping it against competitors.

"We suspect that higher fuel prices may be a relative advantage for us," Amazon CEO Jeff Bezos said during a conference call with analysts on Wednesday. "Even just driving 10 miles these days is a few dollars worth of gasoline and consumers we suspect are beginning to take that into account."

Amazon's free shipping offers and Amazon Prime are more valuable to customers because of that, he said. Amazon will continue to work to make free shipping offers economical and "we have clearly no intention of changing those. We'll keep them in place," Bezos said.

The company reported its net profit more than doubled year-over-year to US$158 million in the second quarter, while revenue increased 41 percent to US$4.06 billion.

In fact, several technology companies have reported stellar earnings, the kind that make the economic slowdown look like somebody else's problem. Intel, for example, reported record high second quarter revenue of US$9.5 billion on strong microprocessor sales, and its net profit and forecast for the third quarter beat analysts' estimates.

IBM also exceeded analyst expectations for its second quarter earnings and surprised investors by boosting its earnings forecast for 2008, a sign the company believes it can weather current economic turbulence.

A lot of technology companies have reported strong results but still been hammered for weak forecasts or negative statements about the economy.

Google, for example, reported solid second quarter results, but it fell afoul of investor sentiment when executives raised the issue of facing a "more challenging economic environment."

Microsoft also took a beating when its earnings for the quarter fell short of analysts' expectations by a penny (US$0.01). The company still reported net profit rose 42 percent year-over-year to US$4.3 billion.

Apple also reported strong earnings on Monday, but its stock fell about 10 percent in after-hours trading on a range of worries, from Steve Jobs' health to a weak earnings forecast for the current quarter and the biggest culprit: a plan to lower product prices so it can grab more market share from rivals.

Some analysts say lowering prices could bode well for the company but they want to see sales increases and market share gains before they approve. Apple has long been valued for the premium it can charge for its products. The company's design prowess and quality gadgets have won a loyal following.

While worries about the overall economy have been the main culprit behind investor reactions to earnings releases this quarter and likely will be for the foreseeable future, some companies remain well ahead of the game and could continue to outperform as business conditions worsen.

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