Wall Street Beat: Tech Sector Boosts Markets

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With tech bellwethers like Apple, Yahoo, Advanced Micro Devices, EMC, AT&T, Amazon and Microsoft this week reporting financial results and giving guidance for the next few quarters, industry watchers are feeling more secure about the second half of the year.

The tech leaders have also helped broadly boost markets. By Thursday, the tech-heavy Nasdaq index had risen for 12 straight sessions, hitting 1973, well above its 2009 low of 1268 on March 9. It was the longest winning streak for the Nasdaq since 1992. The March low was the Nasdaq's lowest close since October 2002, near the trough of the dot-com bust.

Tech companies were credited with spurring a rally that drove the broad S&P 500 index to its highest point so far this year. And IT vendors in the Dow including IBM and Intel -- which reported financials last week -- also helped boost that index, which includes 30 large public companies. The Dow hit 9069 Thursday, its highest point since early this year.

Macroeconomic data is helping fuel confidence as well. The National Association of Realtors said Thursday that existing home sales rose for the third straight month in June, while the Labor Department reported that total unemployment benefit rolls fell to the lowest level since mid-April, though new claims rose partly as a result of auto plant closings.

Despite the generally positive reaction of investors to tech earnings overall, Microsoft disappointed when it reported Thursday that its quarterly net income fell to US$3.05 billion, or $0.34 cents a share, from $4.3 billion last year. Revenue dropped 17 percent to $13.1 billion. Analysts had expected EPS of $0.36 and $14.37 billion in revenue, according to Thomson Reuters.

"Our business continued to be negatively impacted by weakness in the global PC and server markets," said Chief Financial Officer Chris Liddell in the earnings release -- an understatement about the state of the tech industry in the first half of the year.

Investors reacted swiftly, with Microsoft shares dropping by $1.78 to $23.76 in after-hours trading within 30 minutes of the Microsoft report.

Amazon, also reporting after the market closed Thursday, said quarterly sales were $4.65 billion, a 14 percent jump over the same period last year -- good news for those looking for signs of a spending recovery. However, net income was $142 million, down from $157 million. The news drove down company shares, which slipped by $7.37 to $86.50 in after-hours trading.

For the most part, however, tech investors seemed to latch on to strands of good news in reports on a quarter where most vendors suffered compared to last year.

Reporting earlier Thursday, EMC said net income for the quarter hit $205.2 million on revenue of $3.26 billion, down from $360.1 million and $3.67 billion, respectively, for the year-earlier quarter. But the good news is that the company believes the market has bottomed out.

"While global conditions remain challenging and our full-year view of declining IT spending remains unchanged, EMC's second-quarter financial performance reflects customers' budget stabilization and improved business predictability, " said David Goulden, EMC chief financial officer, in the company's financial statement.

EMC projections for the rest of the year top analyst estimates. For 2009, EMC forecasts earnings per share of $0.82 and revenue of $13.8 billion, including its acquisition of Data Domain, completed this week. Analysts had expected EPS of $0.78 and revenue of $13.49 billion, according to Thomson Reuters. EMC shares rose by $0.59 to hit $15.

Telecom giant AT&T, also reporting Thursday, did not make comforting pronouncements about the rest of the year, as it reported a 15 percent dip in net income from last year, to $3.2 billion, on flat revenue. However, earnings per share of $0.54 were better than the $0.51 forecast by analysts. Investors also were cheered by wireless revenue, which jumped nearly 10 percent to almost $12 billion this past quarter, fueled by AT&T's exclusive handset deal with Apple's iPhone. AT&T shares jumped $0.64 to $25.48.

On Tuesday, chip maker AMD reported that it narrowed its net loss. The crawl back to profitability is not as fast as analysts had hoped, however. AMD had a net loss of $330 million, or $0.49 per share, compared to a net loss of $1.195 billion a year ago. But analysts polled by Thomson Reuters expected a net loss of $0.47 per share. Though AMD shares took a hit on the report midweek, the general upturn in the market helped the company. AMD shares rose by $0.04 Thursday to reach $3.59.

Apple on Tuesday reported what was probably the biggest success story of the week. The company generated net income of $1.23 billion, or $1.35 per share, up from $1.07 billion last year, on revenue of $8.34 billion. The results blew past expectations of analysts polled by Thomson Reuters, who forecast $8.20 billion in revenue and $1.17 per share.

As sales of the iPod wane, sales of the iPhone are skyrocketing. iPhone revenue totaled $1.69 billion, up by more than 300 percent from last year. Apple shares jumped Wednesday by $5.23 to hit $156.74, and rose again Thursday.

Also on Tuesday, Yahoo reported quarterly revenue of $1.57 billion, down 13 percent from a year earlier. Cost controls helped the company's bottom line, however. Net profit was $141 million, up from $131 million. Excluding one-time charges, earnings per share were $0.16, blowing past the $0.08 per share that analysts had been expecting, according to Thomson Reuters.

In a statement that could have been uttered by many leading tech company executives, CEO Carol Bartz said on a conference call that, "considering the economy, I'm pleased with our results."

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