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Wall Street Beat: Google, strong sales boost tech

Marc Ferranti | Oct. 17, 2011
Strong results for tech companies, especially Google, and an easing of concerns about the economy boosted confidence in the computer sector, as markets closed Friday on a positive note.

Strong results for tech companies, especially Google, and an easing of concerns about the economy boosted confidence in the computer sector, as markets closed Friday on a positive note.

Companies as diverse as Google, SAP, Computer Services Inc. (CSI) and Fairchild Semiconductor turned in positive earnings this week. Computer company stocks on the Nasdaq were up by 1.9 percent in aggregate Friday, as the exchange as a whole rose 47.61 points to close at 266.85. Google rose US$32.69 to close at $591.68, leading the markets up.

Google's results point to its continued dominance in search, while CEO and co-founder Larry Page on a conference call Thursday highlighted the growth of the company's recently launched social networking site, Google+, which he said now has 40 million members.

Google said it ended the quarter with revenue of $9.72 billion, up 33 percent year on year, and net income of $2.73 billion, up from $2.17 billion. Both sales and profit handily exceeded the forecasts of analysts.

While Google took the headlines, other companies confirmed some key trends, including rising sales for enterprise software and services.

ERP (enterprise resource planning) giant SAP, for example, said its third-quarter revenue rose 14 percent year on year, while operating profit more than doubled, helped by a revision of the sum reserved to settle litigation with Oracle over SAP's former TomorrowNow subsidiary. But even excluding the recalculation, third-quarter revenue rose 12 percent to €3.41 billion (US$4.69 billion) and operating profit jumped 23 percent to €1.127 billion. SAP shares on the New York Stock Exchange rose Friday $1.49 to close at $57.66.

CSI also on Friday reported record revenue and net income for the August quarter, as sales rose 3.8 percent to $43.5 million and profit increased 3.4 percent to $6.4 million. It was the company's 29th quarter of sales growth.

There was even good news in the embattled semiconductor sector, as Fairchild Semiconductor earnings came in at $0.34 per share on revenue of $403.2 million, beating the expectations of analysts. Canaccord Genuity technology analyst Bobby Burleson noted the company should benefit from "normalizing channel inventories in early 2012, following a brutal H2/11 that has distributors working down inventories to unsustainably low levels."

The hardware market is in general expanding more slowly than expected, according to both Gartner and IDC this week. In a research note, IDC said that worldwide PC shipments increased by 3.6 percent in the third quarter compared to the same quarter in 2010, up slightly from the 2.7 percent growth experienced in the second quarter but below August projections for 4.5 percent growth. The Americas and EMEA were slightly below expectations, IDC said.

 

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