Wall Street Beat: Tech shares continue their roll in markets

IBM breaks share price record, Apple shares forecast to hit $700

Shares of technology companies continue to ride high as confidence in the U.S. economy grows, boosting markets and stock indexes to levels not seen in years.

The tech-heavy Nasdaq closed above the 3,000 mark Tuesday for the first time since the middle of 2000, when it was in a rapid decline during the dot-com bust. Though the exchange declined a bit Friday afternoon, it stayed above 3,000, closing at 3055.26.

The Standard & Poor's 500 stock index closed on Thursday above 1400 for the first time in four years, rising again Friday to 1,404.20. About 20 percent of the stocks included in the S&P index are technology-related.

The Dow Jones Industrial Index, meanwhile, closed up by 58.66 point Thursday, at 13,252.76, its seventh straight day of gains, but slipped a bit Friday, closing at 13,233.61.

The improving job scene in the U.S. has been a major factor in increased confidence in the economy overall. According to a government report Thursday, for example, the number of U.S. workers claiming new unemployment benefits fell to a four-year low last week.

Tech companies have been on the vanguard of the recent rally. Though shares of computer companies on the Nasdaq dipped somewhat Friday, they are nevertheless up by more than 20 percent for the year, higher than any component of the exchange.

On the New York Stock Exchange, IBM shares rose Thursday by US$1.28 to close at $206, a record high for the company. On Friday, shares closed up by $0.01, its eighth straight day of gains. Though IBM has for years been eclipsed as the number one tech company in terms of either revenue or market capitalization (share price multiplied by number of outstanding shares), it nevertheless remains an industry bellwether because of its broad portfolio of enterprise products and global reach. Last quarter, IBM reported that net income was $5.5 billion, up 4 percent year over year.

Apple, which released its newest iPad Friday, has not only been the star of the tech arena, but the most highly valued company in the world in terms of market capitalization. On Wednesday, Apple shares briefly crossed the $600 mark -- a record for the company -- but closed at $585.86. Apple shares rose by $0.01 Friday to close at $585.57.

Piper Jaffray this week raised its target price for Apple, and along with other investment advisers including Morgan Stanley and Canaccord Genuity is saying that shares in the company will break the $700 mark. The brokerages foresee Apple hanging on to its dominant share in the tablet market, and maintaining a high share of the smartphone market. What's more, the analysts have been hiking their estimates for smartphone and tablet sales in general.

Piper Jaffray now forecasts that 189 million iPhones will be sold next year, an increase over prior estimates of 162 million. The firm also estimates that Apple will grab a 23 percent market share in the smartphone space, compared to its prior forecast of a 20 percent market share. In the tablet arena, Piper Jaffray estimates that Apple could sell 86.5 million iPads in 2013, up from its prior estimate of 75.5 million.

Though Apple has grabbed the lion's share of financial headlines lately, there has been good news in other sectors of tech. IDC said Thursday that global PC microprocessor revenue in the fourth quarter of 2011 rose to $10.9 billion, up 14.2 percent year over year. For all of 2011 PC microprocessor revenue rose 13.2 percent to more than $41 billion.

The 2011 figures for microprocessor revenue turned out to be positive, considering that the tragic earthquake and tsunami in Japan a year ago and floods in Thailand later in the year disrupted PC market supply chains. In addition, economic concerns caused by stubborn unemployment in the U.S. and sovereign debt woes in Europe put a damper on demand for hardware, analysts said.

IDC said processor unit shipments increased 3.6 percent in 2011 compared to 2010. This year, IDC is forecasting PC microprocessor unit shipment growth at 5.1 percent.

But IDC says that may end up hiking that estimate. "Since the end of 2011 and through the first quarter of 2012 so far, IDC observes that the hard disk drive shortage that caused PC OEMs to cut back on advanced purchases of PC microprocessors has improved," IDC said in its report. "IDC now believes that the HDD shortage will not be a significant factor in PC shipments in 2Q12. Combined with improving job growth in the United States and stabilization of sovereign debt issues in Europe, IDC may raise this growth rate modestly after the close of 1Q12."

Although Intel remains dominant in the market, a rising tide is lifting several boats: Investment firm Jeffries on Thursday upgraded its recommendation on shares of Advanced Micro Devices, to "buy" from "hold."

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Marc Ferranti

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