Technology giants Microsoft and Intel reported quarterly earnings that were slightly better than Wall Street’s modest expectations Tuesday, offering a glimmer of hope for an industry battered by years of weak demand.
Microsoft, the world's largest software maker, beat the consensus estimate handily by posting a slight increase in net income and an 8 percent rise in revenues for the quarter ending March 31. But in their typical fashion the company executives cautioned investors that earnings over the next year are likely to be a bit below expectations.
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Intel, the No. 1 maker of microprocessors, said earnings and revenues fell slightly from the year-earlier period, but the results were still better than analysts had forecast. Stock in both companies rose in extended-hours trading after the results were released.
“I think people were happy there were no negative surprises,” said Jim Volk, managing director of equity trading for D.A. Davidson & Co. in Portland, Ore. “I think it’s going to help the market tomorrow if things hold as they are.”
Microsoft reported profit of $2.79 billion, or 26 cents per share, for its fiscal third quarter, compared with $2.74 billion, or 25 cents per share, a year earlier. Analysts had forecast a profit of 24 cents per share.
Revenues rose to $7.84 billion from $7.25 billion a year earlier, compared with the $7.75 billion projected by analysts polled by Thomson First Call.
Chief financial officer John Connors said company executives were happy with the results despite what he described as a “very tough environment” of fragile consumer confidence and global economic weakness.
In issuing the company’s initial guidance for the fiscal year that begins July 1, he said executives are not counting on any improvement in macroeconomic conditions.
“There are no clear indications the demand for PCs or corporate information technology is improving,” he said in a conference call with analysts and investors. “If (demand) rises, it should lift all boats. If it were to decline, we would not be immune.”
But Connors also said Microsoft has a strong pipeline of new products, including upcoming new versions of Office, Exchange and Windows Server.
For fiscal 2004 Connors projected revenue of $33.1 billion to $33.8 billion and earnings of $1.04 to $1.06 per share. Those figures were slightly below the average forecast of Wall Street analysts, which called for earnings of $1.08 a share and revenue of $34.8 billion, according to Thomson First Call.
INTEL RESULTS EASE FEARS
Intel’s first-quarter results eased investor fears that weak sales of flash memory would more than offset strength in its core computer microprocessor business.
For the period ended March 29, Intel earned $915 million, or 14 cents per share, on sales of $6.75 billion, a slight decline from the year-earlier period when Intel posted earnings of $936 million, or 14 cents per share, on sales of $6.78 billion. Analysts were expecting Intel to report earnings of 12 cents per share on sales of $6.7 billion, according to Thomson First Call.
“Our financial performance for the quarter was solid,” said Intel chief executive Craig Barrett.
Intel projected second-quarter revenue of between $6.4 billion and $7 billion, compared with the $6.6 billion forecast on average by analysts. John Lau, semiconductor analyst for RBC Capital Markets, said the forecast “indicates things are still on track and nothing has deteriorated significantly.”
It’s unclear what impact, if any, a delay in the launch of the latest Pentium 4 processor will have. The chip was to have been launched Monday but was pulled at the last minute after a potential flaw was uncovered during testing.
Despite the market focus on flash memory, which is used in cell phones, Meta Group analyst Jack Gold said the slumping personal computer market is Intel’s biggest problem. He noted that microprocessors make up about 80 percent of the company’s revenue.
“The real culprit is the downturn in the PC market,” he said. “Until that turns, they’re going to feel some pain. My sense is it’s going to be another couple quarters before the purse strings open up again.”
Although both Intel and Microsoft reported their earnings after the close of regular Nasdaq trading, both stocks continued to trade electronic networks. Microsoft was trading at $25.70, up from $24.61, while Intel was at $18, up from $17.13.
TI REVENUES JUMP
Separately Texas Instruments, the top maker of semiconductors for cell phones, Tuesday said revenues rose 20 percent in the quarter, allowing it to report a profit, compared with a loss a year ago.
The Dallas-based chip maker posted net income of $117 million, or 7 cents a share, compared with a loss of $38 million, or 2 cents a share, a year earlier. The company had forecast first-quarter earnings of about 6 cents per share.
Revenues were $2.19 billion, compared with $1.83 billion a year earlier.
Texas Instruments said it expects current second-quarter revenues to rise about 7 percent from the first quarter and it expects second-quarter earnings per share to be about 8 cents, “plus or minus a few cents.”
MOTOROLA POSTS ANOTHER PROFIT
Motorola, the world’s second-largest maker of wireless phones, posted a net profit for a third straight quarter, continuing a rebound after six quarters of losses.
Motorola also trimmed its forecast forr the current year slightly, bringing the numbers in line with what analysts were already predicting.
Nonetheless, the stock surged in after-hours trading on Instinet to $8.40 from the Tuesday closing price of $7.94 on the New York Stock Exchange.
“It could be because (Texas Instruments) was OK and Intel was OK and Microsoft was OK and it wasn’t a disaster,” Deutsche Bank Securities analyst Brian Modoff said.
Motorola reported net profit of $169 million, or 7 cents a share for the quarter, compared with a loss of $449 million, or 20 cents a share, in the year-ago quarter. Sales slipped to $6.04 billion from $6.18 billion a year ago. Analysts had expected $6.06 billion, according to First Call.And Motorola, the world’s second-largest maker of wireless phones, posted a net profit for a third straight quarter, continuing a rebound after six quarters of losses.
The company forecast weaker-than-expected second-quarter earnings, and said income for the full year could be below its previous forecast, bringing it in line with what analysts were already predicting.
Nonetheless, the stock surged in after-hours trading on Instinet to $8.40 from the Tuesday closing price of $7.94 on the New York Stock Exchange.
“It could be because (Texas Instruments) was OK and Intel was OK and Microsoft was OK and it wasn’t a disaster,” Deutsche Bank Securities analyst Brian Modoff said of Motorola’s results and the after-hours stock surge. He has a “sell” rating on the stock.
Motorola, based in the Chicago area, reported a first-quarter net profit of $169 million, or 7 cents a share, compared with a loss of $449 million, or 20 cents a share, in the year-ago quarter. Excluding one-time items, the company’s profit was a penny a share, in line with expectations.
Sales slipped to $6.04 billion from $6.18 billion a year ago.
The flood of tech earnings came after a day that saw IBM stock gain 3.4 percent, propelling the Dow Jones industrial average, after reporting an increase in quarterly earnings and backing estimates for the rest of the year.
“Overall, what I keep hearing over and over again from traders is, ‘It’s not a blowout, but it’s just good enough to keep a rally going,’” said Brian Pears, head of equity trading at Victory Capital Management.
The Associated Press and Reuters contributed to this report.