Wall Street Beat: Tech earnings offer bright spots

IDG News Service - With Apple leading the revenue charge midweek and Amazon providing a kick to trading in tech shares Friday morning, bright spots appeared in what has otherwise been a mixed earnings season.

Vendors as diverse as SAP, ARM and Amazon gave tech-sector watchers some cause for cheer, after IT powerhouses such as IBM and Intel reported flat first-quarter sales last week.

Amazon shares skyrocketed Friday morning, trading at US$222.67, up by $26.79. The jump in share price helped boost the tech-heavy Nasdaq exchange by 13.10 points to 3063.71.

Late Thursday, Amazon reported a 35 percent year-over-year decline in net income, to $130 million, for the quarter ending March 31. However, revenue rose 34 percent to $13.18 billion. Amazon has been spending a lot of money as it moves from providing physical goods like books and CDs to electronic delivery of media like videos and e-books, dampening profit even as sales have jumped. In addition, Amazon has ramped up its Web Services hosting platform, trying to take advantage of the move to cloud-based apps on the part of users and corporations. Judging from the share price, investors agree with this strategy.

Apple was the star of the week, blowing away sales and profit expectations due largely to a great quarter for iPhones, especially in international markets. Strong sales of iPads also helped. Apple posted quarterly revenue of $39.2 billion, compared to $24.7 billion for the same period in 2011. Net profit jumped to $11.6 billion from $6 billion. The company sold 35.1 million iPhones in the quarter, showing 88 percent year-over-year unit growth.

Though iPhone activations in the U.S. slipped from the prior calendar quarter, when the iPhone 4S was introduced, international sales were strong. This is a key piece of information for Apple watchers. Apple up to now has done very well in markets that are maturing and needs to come on strong in developing markets. Last quarter, international sales accounted for 64 percent of total revenue, Apple said.

"While our checks indicate slowing iPhone sales ahead of the iPhone 5 launch, we believe very strong international iPhone sales position Apple for very strong sales of an LTE iPhone 5 in the December quarter and beyond to drive strong F2013 earnings growth," said Canaccord Genuity technology analyst Michael Walkley, who reiterated his "buy" rating on the company and raised his price target to $775 from $740 after the results were announced.

The explosion in use of mobile devices around the world also helped ARM, the designer of chips used in, among other devices, many gadgets based on Google's Android OS. ARM announced that quarterly sales rose to APS132.5 million from A APS116A million ($209.4 million from $185.5 million). Profit before was APS51.3 million.