Wall Street Beat: Earnings, Data Buoy Tech Stocks

Marc Ferranti, IDG News Service Thu May 1, 5:40 PM ET

Positive earnings news this week from vendors including Symantec, Adobe and Comcast, along with macroeconomic news, continued to buoy spirits of IT investors at the tail end of a better-than-expected earnings season for technology.

SAP results for the first calendar quarter, announced Wednesday, were under expectations but had a silver lining. A slower rollout for its Business ByDesign product for small businesses, plus a weak dollar, led income to drop to €242 million, or US$372 million, a 22 percent decline in income from last year. Weakness of the dollar against the euro hurt, since the German company generates much of its sales in the U.S. But the company's cost picture is looking good: It raised its operating margin forecast for the year to between 28.5 percent and 29 percent, compared to 27.3 percent in 2007.

Some analysts stressed the positive aspects of the report. Ovum analyst Warren Wilson noted that revenue growth, though below expectations, was nevertheless in the double digits, and the company continues to gain share.

"SAP also claimed another quarter of market-share gains, its ninth in a row, and held 32.6 percent of the core enterprise applications market in the year that ended March 31, 2008, up from 28.2% a year ago," Wilson said in an e-mail. "We don't quarrel with the overall trend, or with the overall strength of SAP's financial results, especially given the 'headwind' of a falling U.S. dollar and economic slowdown."

In a generally up market on Thursday, SAP closed at $50.71, up by $0.48.

Also reporting on Wednesday, Symantec posted earnings of $309 million, a 50 percent leap up from last year and better than analyst expectations. The company highlighted a strong batch of recent security offerings and also pointed to the fact that more than 50 percent of sales come from high-growth markets outside of the U.S.

However, even some U.S.-centric companies had positive news. Comcast on Thursday reported that revenue rose 10 percent to $7.9 billion, fueled by high-speed Internet market gains. Profit declined by 12.5 percent to $732 million, but last year's quarter was boosted by an extraordinary gain related to the transfer of cable systems to Time Warner.

A better-than-expected jump in broadband customers cheered analysts, who also noted gains by other U.S. telecom and cable sector heavyweights this season.

"Like with other competitors, Comcast growth continues strong," analyst Jeff Kagan said in an e-mail.

Comcast shares rose by $1.76 to close at $22.31 Thursday.

Also on Thursday, Adobe reported that, in effect, economic uncertainty in the U.S. probably will not affect its results. That's a change from last month, when it said that if the economy continued to contract, it would have to cut its forecasts for the year. As it announced that it is opening up access to its Flash technology via its Open Screen Project for a Flash-based, rich content environment for all devices, the company also said it expects current-quarter results near the high end of its targets and reaffirmed full-year forecasts. Last month, Adobe said it expected revenue of $855 million to $885 million. The company's share price rose by $1.72 Thursday to close at $39.01.

Not all results were positive this week. Sun, for example, reported a loss of $34 million, down from a $67 million profit last year. The results, announced Thursday, ended five quarters in a row of profits for the company, which suffered after the dot-com bubble collapsed in 2002. The company blamed a slow U.S. economy.

However, the slowing economy notwithstanding, a range of tech-sector companies have reported better-than-expected earnings over the past few weeks. Intel, Apple, Google, AT&T and IBM, for example, beat analyst estimates. This week, the government reported first-quarter gross domestic product of 0.6 percent-- depressed, but not a recession. A rising dollar and falling oil prices on Thursday also helped brighten the macroeconomic picture. The tech-heavy Nasdaq managed to close April at 2,412, above the March close of 2,279.