Wall Street Beat: Tech looks good to investors

The tech sector looks good to investors, even as the U.S. economy remains a concern.

Amid uncertainty about the greater economy, technology companies are looking good to investors. Strong earnings from Red Hat this week and Oracle last week, continued excitement over mergers and acquisitions, and solid forecasts for global component sales have been pushing shares of tech vendors up.

Over the last week, the share prices of a variety of bellwether tech companies have hit 52-week highs. Shares of eBay, AT&T and Verizon Communications closed at their highest levels in a year while Apple and Google hit all-time highs.

IT investors boosted Red Hat shares, which closed Wednesday at US$19.89, up by $1 after the company's quarterly results announcement on Tuesday. Solid sales and efforts to contain costs helped lift net income to $19.1 million, up from $12 million from one year earlier. Revenue rose 28 percent for the period, to $127.3 million.

Growth for middleware vendor JBoss, which Red Hat bought last year, was not as good as hoped for, but revenue figures indicate that the company's core business is doing better than expected, said brokerage JMP Securities LLC in a research note. Products shipped this quarter included the JBoss Enterprise Application Platform 4.2.

Shares of Apple, flying high mainly on excitement over its dominance in the music device market and the recent launch of iPhone, Monday hit an all-time high after the brokerage unit of Citigroup raised its price target for the company to US$185 from $160. Citigroup Global Markets noted that in addition to its mobile device business, sales of Macs are exceeding prior estimates. Apple shares rose by $4.13 Monday to hit $148.28, and drifted upward during the week.

EMC also was the subject of positive remarks from analysts, with both Citigroup and brokerage Bear Stearns & Co. raising their ratings on the company. Both brokerages were pleased with EMC's continued ownership in VMware, part of which was spun off in an initial public offering in August.

VMware shares started trading at $57, moving upward to $80 this week. The company is gaining on the strength of its dominance in virtualization technology, which allows multiple processes to run more efficiently on servers and is increasingly popular as data centers seek to cut costs.

EMC closed Wednesday at US$82.36, $25 higher than where it was trading at mid-quarter.

M&A activity, which has stoked investor excitement this year as the number of deals hits the highest level the market has seen in years, continued this week with EchoStar Communications announcing Tuesday that it plans to buy Sling Media. Sling offers technology that allows TV-watching over the Internet. EchoStar shares jumped by US$2.92 to close at $44.14 Tuesday on the news.

Industry watchers also look at forecasts for component sales, to get a sense of how market demand will play out over the next few quarters. iSuppli this week reduced its forecast of global semiconductor revenue growth in 2007 to 3.5 percent, down from its prior estimate of a 6 percent increase. But while the chip forecast slipped, the estimate for shipments of electronic equipment using semiconductors has improved, iSuppli said. The market research company raised its forecast of 2007 electronic equipment revenue growth to 6.8 percent, up from 6 percent before.

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Marc Ferranti

IDG News Service
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