Wall Street Beat: Red Hat, Tibco and Apple lead tech charge

The IT sector shows resilience during market swings

Red Hat, Tibco and Apple helped buoy technology investor confidence this week even as economic concerns caused volatility in the markets.

Red Hat and Tibco's good news about the enterprise software market appeared to outweigh AMD's revised revenue forecast, while Apple shares hit an all-time high that boosted it past PetroChina to become the second-biggest company in the world in terms of market capitalization, behind Exxon Mobil.

Tibco, announcing results after the market closed Thursday, said sales were $US184.5 million and net income was $17.4 million for the three-month period ending Aug. 29. This handily beat last year's figures for the period, of $150.3 million in sales and $14.9 million in profit.

Tibco closed Thursday at $16.37, up by $0.46, and its share price continued climbing Friday morning, hitting its highest mark since 2002.

Reflecting on why share prices of so many tech bellwethers have slumped in the past quarter, Tibco CEO Vivek Ranadivé stressed product portfolios rather than macroeconomic conditions. Though various IT heavyweights have announced solid results over the past few months, some major players are seen to be mired in the past, Ranadivé said.

"Some companies are providing 21st-century solutions," Ranadivé said in a Friday interview in which he took a swipe at companies including Microsoft, which he said offered a "20th-century" approach to software. Microsoft's share price, despite recent record results, has languished for years under CEO Steve Ballmer's leadership.

Just as Apple is a "21st-century consumer electronics company," Tibco's automated business process management (BPM) and analytics offerings, based on service-oriented architecture (SOA), are hitting a "tipping point" where they have become increasingly accepted as an essential part of the way business needs to be done in the Internet era, Ranadivé said.

Still, Tibco doesn't get as much respect in the market as some other enterprise software vendors. Ranadivé noted that shares of vendors such as Red Hat sell at much higher multiples of earnings.

Red Hat, which released results Wednesday, hit its highest intraday price in a decade Thursday and is continuing to rise Friday. In early afternoon trading, shares were selling at $41.21, up by $1.14. For the three-month period ending Aug. 31, Red Hat's revenue was $220 million, up 20 per cent from the year-earlier period. Profit was $23.7 million, down from the year-earlier period's $28.9 million, but traders seemed to forgive the decline since the 2009 result was boosted in large part by a one-time tax benefit.

"We continued to benefit from new project spending, expansion and cross selling of our product solutions and strong renewals in our top accounts," said Jim Whitehurst, president and chief executive officer of Red Hat, in a statement.

Whitehurst pointed to the company's Cloud Foundations portfolio as an "open and cost effective way" to tap into cloud computing.

One of the biggest bright spots of the week came from Apple, whose shares Monday hit what was an all-time high up until that point. They continued to rise throughout the week, closing Thursday with an enterprise market value of $265.8 billion, making Apple the second-biggest company in the world in terms of market capitalization. The latest wave of euphoria in Apple appeared to be spurred by the introduction in China of the Wi-Fi version of the iPad last week.

Not all tech-related market news was good this week. Although Adobe Monday announced record quarterly revenue of $990.3 million and a $94 million jump in profit from a year earlier, to $230 million, it voiced caution about the current quarter. Adobe said it has seen weakness in its Creative Solutions division in the U.S. education market, and forecast revenue of $950 million to $1 billion for the current quarter, a flattening out of its sales.

AMD Thursday lowered its revenue guidance for the fiscal quarter ending this week, citing flagging demand for laptops in Western Europe and North America. AMD expects sales for the quarter to be down 1 per cent to 4 per cent from last quarters' $1.65 billion.

The market was in a buoyant mood Friday, however, and AMD shares in early afternoon trading were up by $0.41 to $6.81. The flattening out of revenue may have been expected by investors, who have been hit with a flow of reports from market researchers warning that the last half of the year probably would not live up to earlier high hopes.

Tech stocks, which slumped after hitting a yearly peak in April, have started to lead markets again this month, through the ups and downs of expectations for the post-recession economy. Thursday, the U.S. Labor Department said initial weekly jobless claims rose by 12,000 to 465,000 in the week ended Sept. 18. Also Thursday, the London-based Markit economic research group said its composite purchasing manager's index (PMI), for both the manufacturing and services sectors in Eurozone, dropped more than expected.

The news caused markets to slump, but they came roaring back Friday on a U.S. government report showing an increase in orders for manufactured goods last month and better news about the European economy from the Munich-based research institute Ifo, which said its business-sentiment index for Germany rose in September. Through it all, tech companies this week have shown the sort of resilience that helped the sector lead markets out of the recession last year.

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Marc Ferranti

IDG News Service
Topics: business issues, Apple, Vivek Ranadivé, Advanced Micro Devices, steve ballmer, financial results, Red Hat, tibco
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