Wall Street Beat: Tech Looks Up, Apple Gains

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Apple, Amazon and Brocade Communications this week gave IT investors cheer as the tech sector, despite inflation fears, looks upbeat at the midpoint of the third quarter.

Apple gained US$6.20 to close at $175.75 Monday, continuing to trade up during the next several days following comments by CEO Steve Jobs in the Wall Street Journal. Jobs said that more than 60 million applications for the iPhone have been downloaded and that the company has taken in $30 million in revenue in the one month since the iPhone 3G was launched. At the current rate of about $1 million a day, Apple stands to rake in $360 million from the iPhone in one year.

Market watchers were quick to flag the fact that, after Apple's close of $179.32 on Wednesday, the company's market capitalization (the share price multiplied by number of outstanding shares) exceeded that of high-flying Google. Google's market cap was $157.23 billion, while Apple's was $158.84. Though Google shares were $500.03, it has fewer outstanding shares.

On Thursday, Apple slipped by several cents to close at $179.23, but market analysts are likely to remain upbeat about the company for some time to come. For example, Goldman Sachs on Thursday raised its price target on retailer Best Buy from $42 to $45 just because the mass-market consumer chain announced it was going to start carrying the iPhone.

Amazon's Kindle, meanwhile, is doing wonders for confidence in the online retailer. Company shares rose $7.58 Monday to close at $88.09 on predictions that the electronic book reader will be a winner for consumers. Citigroup analyst Mark Mahaney said in a research note that he believes Kindle sales will be twice as high as his original predictions. Mahaney now forecasts that 380,000 of the devices will be sold this year. Amazon shares stayed high throughout the week, closing Thursday at $88.03.

Brocade results for its third fiscal quarter helped restore some faith in the U.S. tech market. User interest in networked storage fueled double-digit sales growth and earnings that exceeded expectations. The company said Wednesday that quarterly revenue was $365.7 million, up about 12 percent from a year earlier. Net income was almost double that of a year earlier, hitting $20.3 million. The strong results came in even as the company depended more than ever on U.S. sales. Sixty-five percent of revenue came from the U.S. for the quarter, compared to 58 percent last year.

Meanwhile, Nvidia shares moved up for several days after its Tuesday quarterly results announcement, even though the company reported its first loss in nearly five years. The chip maker said it recorded a $196 million charge in its fiscal second quarter to cover costs related to technical problems. Nvidia had already said in July that some laptop chips were failing because of problems with materials used to package them. Nvidia's net loss for the quarter was $120.9 million. However, CEO Jen-Hsun Huang said he expected a "slight increase" in sales and an improvement in gross margins, and announced a $1 billion stock-buyback program. Investors chose to look at the bright side. Nvidia shares closed Wednesday at $12.26, up by $1.19, and closed Thursday at $13.

Despite fears of inflation, the tech sector has been looking upbeat lately. The U.S. Labor Department said Thursday that July's Consumer Price Index jumped 0.8 percent. But that was not as high as the increase in June, the worst June for the stock market since 1930. The tech-heavy Nasdaq Composite Index, after spiraling downward from the beginning of June, started picking up in the second week of July. It closed Thursday at 2453, well below its year opening at 2609, but above March lows in the 2200 range.

One factor may be an easing of oil prices -- rising energy costs are presumed to hit companies' spending across the board, even for IT. In addition, IT bellwethers such as Microsoft, IBM and Google reported strong sales for the second quarter. In some cases, profits were not as high as Wall Street would have liked, but the revenue gains show that the tech heavy hitters are still experiencing growing sales of services and products.

In the current climate, all eyes will be on Hewlett-Packard results, due Tuesday.

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