Several more US tech stocks helped strengthen US equities during Wednesday and Thursday (April 24) trade. Following in the footsteps of impressive earnings from companies like IBM, AT&T, and Yahoo, Apple and Microsoft helped lead another new earnings push in the technology sector.

The Dow is pushing toward 12,800 again largely on the back of a strong early round of earnings reports, led by technology stocks. The tech-heavy NASDAQ stock index has also jumped soundly this week. In spite of a report that new home sales reached their lowest level in nearly 17 years, stocks were up across the board Thursday thanks to lower unemployment and the continued resilience in earnings.

Technology giant Apple smashed its earnings expectations in its report Wednesday. The company said it earned $1.05 billion, or $1.16 per sharing during its first quarter of 2008. During the same quarter last year, the company managed $770 million in earnings, or 87 cents per share. The profit boost came largely from a 43 percent spike in revenue, to $7.51 billion.

Analysts had expected $6.96 billion in revenue and earnings of $1.07 per share. Many global tech companies have been pounding analyst earnings estimates during the first quarter. Most have attributed some of their revenue growth to increased global demand because of the weak dollar. Simple currency exchanges, from foreign currencies into dollars, have also generated some of the higher revenues. Apple remains strong based on its continued strength through its staple products, the iPod and iTunes, as well as the more recently developed iPhone. Apple’s stock price has risen significantly in the last several months after following below $100 per share late last year.

Digital wireless telecommunications company Qualcomm also sparked market interest as it had an impressive fiscal second quarter. Sales for the company climbed 17 percent to $2.6 billion, besting the $2.5 billion estimated by analysts. The company also announced earnings of $894 million, or 54 cents per share, two cents per share higher than expectations. Qualcomm also gave a strong outlook for its current quarter, something that some of the tech leaders have been hesitant to do in light of the current economic state in the US.

Microsoft announced its earnings after hours on Thursday. Its announcement was much anticipated for a comparison with Yahoo’s positive earnings report earlier in the week. With Microsoft saying it would not raise its current share price offer to buy Yahoo, some analysts were anxious to find out if the company will stick to that statement. It was believed that an overwhelmingly positive announcement from Yahoo probably would have forced Microsoft’s hands. However, while the Yahoo news was good, it likely would not affect the offer on its own.

Microsoft produced a mixed report for the markets. Many analysts had speculated throughout the day that Microsoft might blow away the consensus estimates for revenue and earnings. Unfortunately, the hype was not fulfilled and actually turned decent earnings into an after hours trading disappoint. The stock dropped about $1.50 following the announcement.

Microsoft did have relatively strong earnings per share and operating income for its fiscal third quarter. However, revenue was below estimates, which was disappointing. The more disappointing element of the company’s announcement was its downward earnings estimates for the fiscal 2009 year. Most analysts speculated after the report that it would now be difficult for Microsoft to complete its deal with Yahoo. Microsoft’s stock is likely to struggle following the report, and in lieu of the positive news from Yahoo, it will be hard for Microsoft to produce enough stock or cash to close a deal.

Market Recap

US equities were sparked by positive earnings Wednesday. The Dow was up 48 points on the day. The NASDAQ was up 28 points. The S&P was up about 4 points. Positive earnings from the likes of Apple and Amazon led the markets. Jobless claims fell Thursday, a positive for the market. New home sales reached their lowest level in about 17 years. Ford and ConcoPhillips had strong earnings while Microsoft was mixed in its earnings assessment. Overall, stocks were strong, with the Dow up 85 points, while the NASDAQ and S&P climbed 23 and 8.

Neil Kokemuller
Thursday, April 24, 2008
7:38 PM EST

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.

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