Wall Street Beat: Tech earnings show sector strength

IDG News Service - A raft of computer and software vendor financial results this week, including reports from IBM, Intel, Apple and Microsoft, revealed some record quarterly results and a healthy market for business technology, though clouds remain for segments of the consumer arena.

Economic worries, including concerns about unemployment, the housing market and European debt crisis battered tech stocks along with the rest of the market over the past few months, sending shares of IT companies below their levels at the start of the year. As evidence of strong second-quarter IT sales, especially in the enterprise arena, trickled in over the past few weeks, tech company shares have risen.

This week the stream of announcements became a flood. While other major indexes were down Friday morning, the tech-heavy Nasdaq moved up by 9.29 points to 2,844.36 in midday trading. Computer companies on the Nasdaq are up for the year, in aggregate, by about 6%.

Meanwhile, even though Microsoft on Thursday reported record fiscal fourth-quarter revenue, trading in company shares wavered Friday morning, moving in and out of positive territory. Microsoft's results in some ways were a microcosm of IT earnings, showing strong enterprise sales but softness for products geared for consumers.

Microsoft reported an 8% year-over-year revenue increase, to $17.37 billion, and a whopping 30% jump in profit to $5.87 billion. Sales to businesses were strong. Microsoft Business Division sales rose 16% for the year and 7% for the quarter. However, what appears to be worrying investors is a 1% decline for the quarter (and 2% decline for the fiscal year) for sales for the Windows and Windows Live Division, as PC sales to consumers flagged.

The tone for enterprise sales was set Monday by IBM, which posted better-than-expected results and raised its outlook for the year.

IBM's numbers showed it was hitting on all cylinders in the second quarter, reporting a 12% year-over-year jump in revenue to $26.7 billion and an 8% increase in profit to $3.7 billion.

The quarter gave the company confidence to raise its financial guidance for the year.

"We've taken our expectations for operating EPS up to at least $13.25. That's up $0.25 since January,"said IBM CFO Mark Loughbridge, on the company's earnings conference call. "We're exiting the second quarter with a lot going for us, a strong systems portfolio, continued momentum in software, growth in services backlog with a lot of opportunity in growth markets, momentum in all of our key growth plays and a very strong balance sheet. "

Intel backed up the good news on the hardware side on Wednesday, reporting that quarterly net income rose 2% to $3 billion while sales jumped 21% to $13 billion. It was the company's fifth consecutive quarter of record revenue. In contrast to market-research reports of slow PC growth, Intel said sales for PCs rose by 11% for the quarter.