Earnings disappoint tech investors

IDG News Service - Hopes that the start of the earnings season would bring a fresh wind to the tech sector evaporated quickly this week. The Nasdaq Composite Index, under pressure from the first quarter's dismal close, modest corporate buying plans and concerns about oil prices and inflation, was knocked down yet again in the middle of the first wave of reports.
Investors don't necessarily like surprises, and yesterday, ahead of an unexpected earnings announcement from IBM and after several companies reported, the Nasdaq index dropped 27.66 points to close at 1946.71, a low for the year and its worst finish since October.
IBM, which had said it would report Monday, instead announced on Thursday that earnings were 85 cents per share for the quarter that ended in March, below the 90-cent forecast of analysts polled by Thomson First Call. Profit was $1.4 billion, on revenue of $22.9 billion, both up 3% over last year's first quarter, but analysts were expecting revenue of $23.6 billion.
The main reason that IBM missed expectations was that it failed to close hoped-for deals toward the end of the period, especially in countries with "soft economic conditions," CEO Sam Palmisano said in a statement.
Before the announcement, which came after the market close, IBM shares dropped 93 cents to $83.64. It might take a while for the significance of IBM's report to sink in, but the failure of the world's largest IT company to close deals in the face of uncertain market conditions does not bode well.
For its part, Sun Microsystems Inc. Thursday once again disappointed investors, reporting a loss of $61 million, or 2 cents per share, for the quarter. Analysts had forecast a break-even quarter. Though the loss was narrower than Sun's year-earlier loss of 8 cents per share, revenue, at $2.625 billion, edged down from last year's $2.651 billion. This is especially worrying given that users and investors had been hoping that Sun's renewed efforts -- including new Linux offerings and cheaper servers -- to woo its traditional users in financial institutions would bear fruit in the form of increased sales. Sun had missed analysts' revenue target in the previous quarter as well. In advance of the announcement, Sun fell by 6 cents per share to close at $3.96.

Meanwhile, Apple Computer Inc., which has become a bellwether stock for online music, couldn't get a break from traders despite a Wednesday earnings report that announced record profit and revenue.
As a result of strong Macintosh computer and iPod digital media player sales, Apple posted

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