Wall Street Beat: IPO, enterprise sales boost tech

LinkedIn's offering, sales to big business, boost IT even as PC market slumps

Excitement over LinkedIn's stunning market debut appears to have outweighed concerns this week about Hewlett-Packard and Dell earnings reports, which highlighted a desultory PC market.

LinkedIn shares more than doubled Thursday, closing at US$94.25, up from its $45 price, and continued their ascent through Friday morning, trading at $101.75.

"LinkedIn jumped into legend yesterday," said John Fitzgibbon, founder of IPOScoop.com. LinkedIn's opening day performance gave it a market valuation of more than $9 billion. This gives the company a staggering price-to-earnings ratio -- which compares a company's share price to its earnings per share -- of 554. The average technology company P/E ratio is about 15.

The LinkedIn P/E ratio is reminiscent of the too-good-to-be-true expectations of the dot-com era. There is, however, a marked difference between LinkedIn -- and other social networking sites expected to go public, such as Facebook and Twitter -- and those days.

"This is not another Internet bubble, this is not Insanity.com," Fitzgibbon said.

For one thing, LinkedIn has users, revenue and actual earnings, Fitzgibbon pointed out. The company made $15.4 million profit on $243.1 million in revenue last year. In the dot-com era, "you had all these 20-year-olds with unproven business plans that VCs were willing to throw the dice on, and there were 20 deals a week on the calendar." Now, there are only a small number of companies lined up ready to go public.

LinkedIn also dispelled clouds hanging over the social networking IPO scene after the debut of Renren, dubbed "China's Facebook," and porn-based FriendFinder Networks earlier this month. The value of both of those companies has plunged since their respective IPOs. In Renren's case, its accounting methods have been called into question. FriendFinder meanwhile, has publicly acknowledged it has a history of significant losses. LinkedIn is clearly in a different league, noted Fitzgibbon.

U.S. markets jumped on the news Thursday, with the Nasdaq closing up 8 points to 2,823.31, the Dow Industrials up 45 to 12,605.32, and the S&P 500 up by 3 points to 1,343.60. Exchanges around the world closed high during their respective trading days Friday.

However, in the U.S. on Friday morning, markets including the tech-heavy Nasdaq declined as retailers such as the Gap -- which slashed its annual earnings forecast -- displayed signs of weakening consumer demand. A dull consumer market is relevant to IT, as HP and Dell reported this week.

Results from HP, the world's largest IT company by revenue, confirmed analysts' expectations of a flagging consumer PC market. HP rushed out its quarterly results on Tuesday, a day ahead of schedule, after the Wall Street Journal leaked a memo from Leo Apotheker, about six months into his CEO tenure, cautioning executives to rein in hiring in the face of what he termed was a "tough" quarter.

For the three months ending April 30, HP experienced sluggish growth: Net profit of $2.3 billion on revenue of $31.6 billion, increasing just slightly from a net profit of $2.2 billion and revenue of $30.8 a year earlier.

Worse, HP trimmed its forecast for its fiscal year, to sales of between $129 billion and $130 billion, from a prior estimate of between $130 billion and $131.5 billion. HP blamed, in part, supply constraints in the wake of the Japan earthquake and a flagging consumer PC market for it troubles.

Perhaps more worrying, HP also expects services business to be slow. In what could be seen as a swipe at his predecessor, Mark Hurd, Apotheker said in a conference call that HP had inadequately invested in services.

To some analysts, the earnings report seemed like a litany of excuses, and they oiced concern about Apotheker's leadership. Among other things, company observers have been waiting for results from HP's promised push into cloud technology. "H-P has been known historically for consistency" noted Brian Marshall in a Gleacher & Co. in a market report, "Now they are known for inconsistency."

The silver lining for HP is that software licenses, a measure for how important HP offerings for big business are faring, increased 29 percent. Overall software sales rose to $764 million, from $653 million a year earlier

Enterprise sales helped saveDell's quarter. Dell, reporting Tuesday, said that sales of higher-margin servers and storage equipment to enterprises helped offset weak consumer PC demand. Dell said that in its first quarter, profit almost tripled year-over-year, to $945 million, even though revenue rose only about 1 percent to $15 billion.

Good results for sales to the enterprise tech sector throughout the past earnings season and excitement about social networking appear to have helped boost overall confidence in IT lately. Even though U.S. markets were down on retail news Friday, computer stocks on the Nasdaq were up 4.03 percent for the year and tech, media and telecom stocks on the New York Stock Exchange were up 5.84 percent for the year.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags LinkedInbusiness issuesDellHewlett-Packardfinancial results

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Marc Ferranti

IDG News Service
Show Comments

Cool Tech

SanDisk MicroSDXC™ for Nintendo® Switch™

Learn more >

Breitling Superocean Heritage Chronographe 44

Learn more >

Toys for Boys

Family Friendly

Panasonic 4K UHD Blu-Ray Player and Full HD Recorder with Netflix - UBT1GL-K

Learn more >

Stocking Stuffer

Razer DeathAdder Expert Ergonomic Gaming Mouse

Learn more >

Christmas Gift Guide

Click for more ›

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?