Wall Street Beat: Tech shares up for Q3, but face uncertainty

Tech companies end the quarter on a weak note

Shares of technology companies finished up for the third quarter Friday, but face economic uncertainty for the rest of the year.

The Nasdaq Computer Index closed Friday at 1,675.51 compared to 1,580.13 at the end of June. However, they were down by 16.53 points for the day, amid reports of European protests over austerity measures and concerns about the impending "fiscal cliff" in the U.S. -- a series of drastic government cuts set to be enacted starting next year if Republicans and Democrats cannot reach a budget compromise.

Tech share losses outweighed gains Friday. For example Apple, which last week hit a record closing price of $702.10 over euphoria about the just-released iPhone 5, slipped by US$14.22 Friday to close at $667.10. Though iPhone sales of 5 million units broke records, analysts said that they missed forecasts, and worried that problems in the iOS 6 mapping function could be a sign that Apple's vaunted quality control is slipping a year after Steve Jobs' death.

Tech companies reporting quarterly financials this week offered mixed results.

Enterprise Linux vendor Red Hat Monday reported that sales for the quarter ended Aug. 31 rose 15 percent year-over-year to $322.6 million, as subscription revenue increased 17 percent. Enterprise software has been a bright spot this year as consumer PC sales have slumped. However, Red Hat's net income dropped year over year by $5 million to $35 million.

Company officials ascribed the income drop in part due to an increase in investments in the company's storage business as well as small technology acquisitions, but otherwise were upbeat.

"Our business model and offerings continue to appeal to customers despite the global economic malaise," said company CFO Charlie Peters.

Memory maker Micron Technology on Thursday said that for the quarter ending in August, its loss narrowed compared to the same quarter a year ago. The quarterly loss was $243 million compared to $320 million a year earlier.

Analysts stressed the positive. Micron "reported a better than feared AugQ in line with consensus," noted SterneAgee analyst Vijay Rakesh.

Though DRAM pricing has been weak recently, Micron has reported that memory inventories are much lower, suggesting that there will be some upward pressure on prices later this quarter, Rakesh noted.

Meanwhile demand for DRAM may surge. The average amount of DRAM in each smartphone shipped worldwide is expected to jump by nearly 50 percent this year, as they gain greater functionality, according to an IHS iSuppli report this week.

"As smartphones become more sophisticated, memory usage in the devices continues to rise -- not only to satisfy user wants and needs but also to accommodate demands made by ever-more powerful processors and increasingly refined LCD screens," said Clifford Leimbach, analyst for memory demand forecasting at IHS, in a report.

Beleaguered smartphone maker Research in Motion reported its quarterly earnings Thursday, saying revenue fell year over year to $2.9 billion, compared with $4.2 billion.

The company's sales, however, edged out the consensus estimate of analyst polled by Thomson Reuters, of $2.5 billion. RIM's loss of $235 million was better than the $518 million loss in the prior quarter.

Though market analysts have cut forecasts for global IT spending this year, they still expect overall increases. Forrester earlier this month estimated that 2012 IT spending growth would be 3.6 percent, lower than its January prediction of 5.3 percent.

IDC said that it forecasts worldwide IT spending to increase 6 percent this year in constant currency, just under last year's 7 percent rise. (The difference between the figures from different research companies lies mainly in how they define various categories of IT, notably software, services and communications.)

The overall jump in tech shares in the third quarter, however, likely has more to do with moves on the part of central bankers in the U.S. and Europe to spur their respective economies, than it does with the performance of any particular tech vendor. The tech-heavy Nasdaq, the Dow Jones Industrial Average, representing large companies, and the broad-based S&P 500 all closed Friday up for the quarter.

The U.S. Federal Reserve's announcement earlier this month that it would launch the so-called "QE3," a third round of "quantitative easing," was widely perceived as fueling a general run up in stocks. The Fed said it would buy bonds and possibly other assets until the unemployment rate eases.

Meanwhile, the European Central Bank has promised to buy the bonds of debt-ridden nations in return for budget-cutting austerity measures.

But protests over European austerity measures in recent days in Spain and Greece raise questions about whether politicians will be able to push through budget cuts, raising uncertainty about the rest of the year.

Meanwhile, a slump in the markets this week was widely ascribed to actions of investors cashing in shares to take profits before the U.S. economy hits the fiscal cliff. The S&P 500 index, for example, has declined eight of the last nine days, dropping by 6.48 to close at 1,440.67 Friday.

U.S. government economic reports have been mixed. Orders for durable goods dropped 13.2 percent in August while a new report showed that the U.S. economic output grew at an annual rate of 1.3 percent between April and June, down from the previously reported 1.7 percent gain.

Join the newsletter!

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

Breitling Superocean Heritage Chronographe 44

Learn more >

SanDisk MicroSDXC™ for Nintendo® Switch™

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?