Bad day for techs
IBM reports a jump in profit, but the stock falls as investors expected even better results. Motorola's earnings disappoint; General Electric reports strong results.
More in the latest sign of inflated tech industry expectations, IBM (IBM, news, msgs) reported better-than-expected earnings, but its shares were down.
IBM said fourth-quarter earnings from continuing operations were $3.54 billion, or 2.26 per share, above analysts' estimates of $2.19 per share. But the stock fell nearly $6, or 6%, to $93.48 in after-hours trading, as investors took profits. Shares of IBM have risen more than $4, or 4%, in the past month, and the stock has jumped 21% in the past year. Revenue rose 7.5% to $26.4 billion, from $24.4 billion -- also ahead of consensus estimates of $25.7 billion, but lower than what some investors had hoped for. IBM said new services contracts rose 55% to $17.8 billion for the quarter. Its global services division rose more than 6% to $12.8 billion in a what Annex Research president Bob Djurdjevic called a "gangbuster quarter." But the company's 10% earnings-per-share growth forecast for 2007 was on the lower end of its 10% to 12% target.
Stocks opened lower, for the most part, after weak results from Motorola (MOT, news, msgs) and IBM's disappointment.
At 9:40 a.m. ET, Dow Jones Industrials was down 17.22 to 12,550.71. The Nasdaq Composite had lost 3.57 to 2,439.64, but the Standard & Poor's 500 was up 1.07 to 1,427.77.
Tech investors itching to sell
IBM wasn't the only tech giant whose stock was hit after reporting earnings.
Shares of chip-equipment maker Lam Research (LRCX, news, msgs) fell nearly $8, or 14%, to $46.22 in trading yesterday, after it warned its shipments would decline due to postponements by customers.
Apple (AAPL, news, msgs) reported a 78% jump in net income on Wednesday, but shares plunged nearly $6, or 6%, to $89.07 on concerns about its profit forecast. And Intel (INTC, news, msgs) suffered, too. Intel shares have fallen $1.65, or 7%, to $20.65, since the company reported earnings late Tuesday that disappointed investors.
The drop in IBM shares was due in part to the "overall nervousness" in tech, Rob Enderle, president of the research firm Enderle Group, told Bloomberg News.
Another analyst characterized the share drops as "knee-jerk" reactions: "Once the smoke clears, these stocks will be back up above their previous highs," Stifel Nicolaus analyst Richard Cripps told Bloomberg News.
Today's earnings news
Mobile phone maker Motorola is the latest company to feel the pain from competition. The company reported a 48% drop in fourth-quarter profit this morning. Motorola said net income fell to $624 million, down from $1.2 billion in the same period a year ago. Operating profit was 21 cents per share; the consensus estimate was for 25 cents per share.
The company had warned on Jan. 4 that profit and sales were going to fall short of forecasts because it was selling cheaper handsets and missed some revenue goals.
Some analysts believe CEO Ed Zander is giving up profit in exchange for market share. Shares of Motorola have fallen 16% in the past year, as the company has struggled to find the next big cell phone to follow its hit Razr.
Video: Big tech companies under attack
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