Tech stocks show signs of life

By Pete Southern in LiveWire Economics Blog | July 22, 2009 9:59 |

Two technology stalwarts boosted hopes of investors on Tuesday (July 21) with positive earnings reports. Yahoo said it was able to generate an eight per cent profit gain for its second quarter even in the midst of a sluggish ad sales environment. Meanwhile, Apple followed iPhone and laptops to a 15 per cent profit rise.

The earnings growth by Yahoo was its first since the start of 2008. Investors were more focused on the disappointment in hearing that ad revenue dropped more than it has since the dot-com bust. Shares of the company traded down about two per cent after the announcement.

So how did Yahoo make more money for its second quarter this year than last? Many are quick to credit Carol Bartz, the six-month long CEO of the search engine and media giant. She is credited with helping the company eliminate all unnecessary waste in expenses to combat the struggles in ad revenue. Bartz said that while she is hopeful of improvements in ad sales for the second half of 2009, there are no guarantees.

For its 3-month period that ended at the end of June Yahoo earned $141.4 million, which amounts to 10 cents per share. Last year, it earned $131.2 million, for 9 cents per share. According to Thomson Reuters, analysts had expected the company to earn just 8 cents per share.

Apple has been arguably the strongest player among technology giants during the recession. The company’s advanced innovations include many products that give consumers all-in-one media and entertainment. Thus, many thrifty buyers justified the purchase of Apple products like the iPhone. Laptop sales were also stronger.

Apple said that it earned $1.23 billion, for $1.35 per share for its quarter ended June 27th. This was a marked increase from the $1.07 billion ($1.19 per share) earned for the same period last year. Analysts were expecting just $1.17 earnings per share. This resounding earnings victory sent Apple shares higher after hours Tuesday.

What makes the news from Yahoo and Apple interesting is that they are two companies that have managed to boost earnings during tough economic times, but in very different manners. Yahoo leadership recognized the company was operating in an environment that made ad revenue very difficult to obtain, and focused on cost control measures to eliminate waste. Apple is one of the few examples of a company that managed to not only maintain, but grow its brand’s strength over the last several months.

Although the positive data out of both companies contributed to an overall positive sentiment on Wall Street, it does not guarantee all tech companies are going to see similar success. What it does show is that companies that have effective leadership and intelligent forecasts can adapt their businesses to survive, and even thrive, during down economic periods.

Neil Kokemuller
10:18 PM EST
Tuesday, July 21, 2009

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University. He is also in house stock market commentator at Live Charts UK, where you can find real time charts and share prices .
Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.

Pete Southern About Pete Southern
Pete Southern is an active trader, chartist and writer for market blogs. He is currently technical analysis contributor and admin at this here blog.


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