Major Tech Earnings Start Q3 with a bang Part 2: Yahoo Shines

Another bell weather in its Technology Sector, Yahoo (YHOO) had modest expectations after quarters of struggles and declining growth. Today's earnings were a pleasant surprise as Yahoo topped expectations, signalling that it in fact may be turning the corner with its Ad platform and new acquisitions strategy.

Income fell slightly at $151Million, $0.11/share, same as a year ago, but revenue on the other hand for its own web businesses came in above expectations at $1.28Billion. Analysts had expected $1.24Billion on the top line number and $0.08/share in profit. Yahoo's guidance for the 4th quarter was within the range expected by analysts and that led to relief, leading shares up in after hours trading.

Although Yahoo is losing search share to Google (GOOG) it is not going down without a fight, in fact Yahoo is actively securing exclusive Internet Ad deals, and highlighted a few new ones at the end of the quarter. The company will now produce ads for WedMD, Forbes.com and Cars.com. A slight coup if you will as WebMD was previously using Google's Ad network. These are the kinds of aggressive moves that will bring Yahoo back into the limelight, as Yahoo notoriously lost out in several high profile bidding wars recently.

New CEO Jerry Yang made it his mandate to do a full review of all business units and he is thus far sticking to his word of trying to turn Yahoo around. This quarter is a start, however Google is still miles ahead of everyone in search. If Jerry and the Yahooligans keep securing more exclusive Ad space and build out their network the fruits of that labor will be seen in quarters and years to come. Yahoo however has to refocus on its core priorities and manage its huge user network. The most visited site on the Internet has to have a clearer plan on how it bring all of its services to all of its users in a cleaner and more efficient manner. This is priority number 1 in order for the company to return to its previously held dominant Web position.

Yahoo's successful quarter signals that Advertising remained healthy even during the credit crisis and housing downturn which is a very good sign for the Major player in the sector Google. In fact Google gained $12 after-hours on Yahoo's news as Investors anticipated even better numbers from the leader in Search Advertising Thursday.

This quarter was a definite sign of relief for Yahoo longs, and as the holiday season approaches its all smiles for the company. If Jerry can continue to tighten operations and secure further Ad deals he'll have a high flier on his hands in the year or 2 to come, but the engineers at Yahoo need to continue to innovate and not let the likes of Google and Facebook keep stealing users away. The results here are promising but Yahoo's valuations are still much higher than Google's on a forward basis and only continuing accelerations in profit growth will keep the company on this perch.

Disclosure: Author is long GOOG

Major Tech Earnings Start Q3 with a Bang Part 1: Intel Beat Estimates, Ups Guidance

The major player in its business segment, Intel (INTC) was looked upon to set a direction for Technology early in this earnings season. And set a direction it did as the companies beat expectations and had its shares move higher in after hours trading. Intel came down the pipeline first, and the computer chip maker left nothing to chance this quarter as sales continued to be strong and CEO Paul Otellini projected further strength ahead.

All things that a market cheers! Intel was able to put a number together this quarter that led it do double digit sales growth for the first time in years. First the numbers.
Income was up to $1.8Billion or $0.31/share vs. a year ago $1.3Billion or $0.22/share (an increase of 40%)
Revenue was up to $10.1Billion, which represented an increase of 15% year-over year.

That all important margin issue, that had plagued Intel for much of the past 12-16 months seems to be forgotten as the company has stepped completely ahead of Advanced Micro Devices (AMD) and into its formerly held dominant market position. Due to heavy price wars with AMD, Intel's margins were dropping quarter after quarter, and with that the stock price went stagnant. However in the past 2 quarters this story changed and Intel proved once again that it has market power when it comes to selling processors. Gross margins at the company rose slightly again and the expectation for the 4th quarter is that Intel will be able to nudge them even higher still above 55%.

Analyst estimates had called for more conservative margin numbers leading to $0.30/share and $9.6Billion. Intel handily beat those figures as demand for the company's products were heavy due to increasing laptop use. The very successful Core 2 Duo line proved a winner again as Computer makers like Hewlett Packard (HPQ) and Apple (AAPL) are stuffing the chips in their systems left and right. A quick look over at Amazon's best selling computers list has 4 Apple machines in the top 5 all sporting Intel's Core 2 Duo chip sets. Hewlett Packard holds 6 of the next 10 spots with 4 Intel powered systems and 2 AMD powered systems.

In all, of the top 15 true laptops on Amazon's list, 12 run on Intel chip sets. Now that's dominance in a sector that is growing much faster than traditional computer desktop systems. The company guided even higher than previously for the 4th quarter, now expecting sales between $10.5Billion and $11Billion; analysts were expecting $10.4Billion.

With the way the computer industry is growing, especially in the laptop sector and emerging markets, it's the hardware that will continue to sell and sell well. While all the fuss has been on piracy when it comes to Software, the makers of the nuts and bolts, so to speak, will continue to be strong. While in the Far East piracy runs rampant as the computer market continues to expand the difficulty involved in illegally copying chip design and computer design innovations is paramount to the tasks involved in copying software. Bottom line is, Intel dominates its marketplace, it is the brains behind the most popular systems being sold today and we are coming to an era of innovation in Computers where customers are becoming excited again about what their systems look like and what they can do. This shines a particularly bright light for the rest of the year and beyond for that company, that more times than not, is truly Inside.

Disclosure: Author is long AAPL, INTC

Earnings Week Preview Oct 15 - Oct 19

Busy crop of earnings lie ahead as Major Technology firms and the Financials are set to report quarterly numbers. Citigroup (C) is up first on Monday followed by Bank Of America (BAC) Thursday. The Internet giants lead Technology into the full earnings swing as Yahoo (YHOO), eBay (EBAY) and Google (GOOG) all report on consecutive days.

The Biggest mobile phone maker Nokia (NOK) will have investor eyes squarely on it Thursday and big Bio Techs Pfizer (PFE) and Genentech (DNA) also square off this week. The extended rally since the Fed rate cute has pushed investor confidence higher but it has also made for some weary trading as even slight earnings upside may not be enough to push stocks much higher past record levels.

As Technology has led the rally of late, all eyes seem to be on those uber-growth firms, and whether they can maintain their lofty valuations by trumping street expectations for yet another quarter.

Markets Experience Sharp Selloff after hitting New Highs

Thursday began as another bullish day in the extended rally for the North American markets as the Dow Jones set record highs on sales guidance from mega-retailer WalMart (WMT). Technology also got off to a good start as earnings estimates and price targets were getting bumped higher virtually across the board.

Apple (AAPL) received two price target bumps this morning from analysts at Merrill Lynch and Goldman Sachs pushing shares to an all time high above $170. Similar highs were seen in momentum favourites Research In Motion (RIMM), Google (GOOG), Baidu (BIDU) and VMWare (VMW).

Just before 2pm in this afternoon's trading the markets were up over half a percentage point. It appears whispers travelled and the buyers dam broke and flooded into a massive sell-off. Within minutes the Nasdaq was in the red and major technology stocks saw their new highs evaporating. Cautious comments from JP Morgan regarding Chinese Internet portal Baidu's revenue for the upcoming quarter sparked slight profit taking which seemed to snowball throughout the technology sector. Further adding to the panic were comments made in Europe by European Central Bank Council member Axel Weber who insinuated that 1) the ECB may need to raise rates in order to keep inflation in check, and 2) that inflation should be priority number 1, not economic stability.

There was concern with the Federal Reserve's half point rate cut that the action signified a more worrisome approach to economic stability, rather than inflation. These comments out of Europe show that the ECB seems to be standing firmer towards the side of inflation concerns.

These comments seemed to rekindle trader fears of Inflation and pushed the selling further. A rally that was built around the Fed cutting rates by half a percentage point will certainly not hold up well if there's talk of a potential rate hike being needed to curb inflation. The sectors that have been gaining the most during the rally were the ones hit the hardest; Technology and Energy.

Investors should take heed that the indices were brought back after the drop, meaning that the Dow was able to hold and close above 14,000. If inflationary comments come further to light this could add tremendous volatility for the markets ahead, but investors should be concerned with specific company fundamentals, especially as the earnings season gets into high gear.

Disclosure: Author is long AAPL, GOOG

Markets Lull Ahead of Earnings but Tech Continues to Sizzle

An overall negative market day in North America was propped by continued strength in Technology stocks. The Dow Jones and S&P were both lower but the Nasdaq managed to eek out a quarter percent gain. Volume levels were lower across the board as earnings from major companies are seemingly around the corner.

Technology was at the forefront all day as many new all time highs were not only reached but breached once again. Google (GOOG) most notably passed the $600 mark closing at $609.62.
Apple (AAPL) and Research In Motion (RIMM) continued to show strength with gains of 4% and 3.7% respectively. Previously beaten down names like Akamai (AKAM), up 8.4%, and Garmin (GRMN), up 4.5%, made rebounding strides today.

The winter season has so far been mild, which has put a dent in oil prices, dragging down Exxon Mobil (XOM) and Co. Gas Prices however, have sustained at high levels and that re-ignites investor fears that consumers will take their holiday spending down a notch. It'll be a battle between the bulls and the bears over the next few weeks as the markets seeks a true direction throughout the winter months. So far the Bulls are proving they have the edge, especially in Technology.

Disclosure: Author is long AAPL, GOOG, AKAM