- As a tumultuous few weeks of quarterly earnings taper off, the markets seem a tad confused about how to judge the tech sector's recent performance.
Companies like Dell Computer and Intel, which caused concern with lower-than-expected revenue for the third quarter, managed to post slight recoveries over the past two weeks. Vendors such as Sun Microsystems, however, showed great performance for the quarter, but found their shares lagging following a brief burst.
Amazon.com was one of the companies releasing earnings statements this week. The company lost 25 cents per share for the third quarter on $US638 million in sales for the period. The results beat out analyst expectations, but left lingering doubts as to when the company will ever reach profitability.
While the stock, like that of many dot-coms, bottomed out in recent months, investors seemed encouraged by the tone of executives and forecasts made by Amazon. Company shares made steady gains through the week, jumping well over 10% on Wednesday after the earnings release.
"The stock has had a decent move," says Jeetil Patel, senior analyst at Deutsche Bank Alex Brown in San Francisco. But, he says, "the concerns on the business still remain intact for the most part."
Amazon pointes to increased users, global expansion and a more diverse product line as reasons both for confidence in the company and for a signal that the company may lurch toward profitability in the near future.
"We think it could happen as early as the fourth quarter of 2001," Patel says, regarding when Amazon might turn a profit. Patel remains impressed overall with the business and placed a "market perform" rating on the stock.
"The holiday season should be good for a lot of folks," he says, adding that Amazon's efforts in Europe and elsewhere may make the move into the black happen sooner rather than later.
"Internationally, they have made a lot of progress this year in terms of expansion," Patel says.
Unlike Amazon, Sun already churns out plenty of profits and boasted higher-than-expected revenue and dramatic growth for its first fiscal quarter in its earnings report last week. Sun shares rose briefly in response to the earnings result, but then took an unexpected slide during recent trading.
While companies with sluggish earnings performed well throughout this week, Sun suffered at the hands of investors, sliding down each of day of trading before making a slight recovery Friday. Sun reported net income for the first quarter at $US510 million, up 85% from last year and earnings per share of 30 cents. Sun's stock soared to more than $US122 per share after its earnings report was released, only to fall back to near the $100 range this week. It closed Friday up just over 1% at $103.19.
Microsoft also remained somewhat stagnant after posting solid figures for the quarter. Shares of the software maker struggled at the start of the week, but moved higher in late week trading. News emerged Friday that the vendor suffered from a hack into its network. Microsoft says hackers appear to have gained access to as least some of the valuable source code to its Windows products.
Investors seemed unfazed by the news as Microsoft shares jumped more than 5% Friday.
Compaq Computer also performed well during the week even though the hardware maker says fourth-quarter sales might be less impressive than hoped. Compaq did, however, post strong earnings figures for the third quarter, and its shares seemed buoyed by the results.
Shares of Compaq lurched forward nearly 10% Wednesday after the earnings news and held the gains throughout the week. The company' stock closed down slightly Friday to $US29.95 per share.