From Briefing.com: 7:32PM Microsoft Earnings (MSFT) : Briefing.com is an analysis service, so here's our take on Microsoft earnings report today - it sure is nice to be a pseudo-monopoly.
Microsoft has been treading water for a couple of quarters with flat earnings, as noted in our previous Story Stock. So, what did they do? They forced a lot of big corporate clients to buy long-term licenses for future upgrades rather than to buy upgrades as they come out. In a way, this is moving to a subscription model, and locks in your customer.
Many of the clients probably had no real choice but to pony up and buy the licenses. And, MSFT admitted that many complained about it. It worked.
Microsoft blew out revenue estimates, coming in at $7.75 billion compared to expectations of $7.1 billion. On the conference call, MSFT said this was primarily due to a couple hundred million more than expected from the long-term licenses and $135 million from foreign exchange fluctuations. They also noted higher demand in selected sectors and a billing issue, but they also said the PC market was soft and was as they had anticipated in earlier guidance.
So, MSFT continues to generate more and more revenue from business licenses and less from final demand for PC's.
The stock rose $2.63 in after hours trading to $53.40 after rising $0.36 to $50.77 during the regular session. This after hours gain is justified. With the new licensing model, MSFT not only boosted revenue this quarter, they locked in future revenue. Technically, this comes from the fact that although they billed for these licenses in advance, they will book the revenue over time (reducing unearned revenue).
The future is less clear though. Microsoft guided revenue estimates higher for next quarter to $8.5-$8.6 bln, but said profits would be $0.45 to $0.46 a share, below current Wall Street forecasts of $0.50 a share. Next quarter, MSFT apparently expects higher revenue than this quarter, but lower profits. Clearly, if more revenue is going to be booked (partly from the licenses), it helps profits. Costs of some sort must be going up. Or maybe MSFT is just being ultraconservative again.
The bottom line is that MSFT posted better than expected profits, but if profits next quarter come in at $0.45 or even $0.50, then there isn't any clear uptrend in profits. Yes, the move to licensing was very successful, and it helps create more certain revenue streams in the future. But it may be just a one-time shift upward in the revenue curve rather than something that will generate steady growth. The bounce in the stock is justified, we just aren't sold yet that MSFT is off on a new earnings growth rate that would deserve a higher price/earnings multiple than the current 27. -- Dick Green, Briefing.com
7:16PM Thursday After Hours price changes vs 4pm ET levels: Following tonight's rush of earnings news, it appears as if the equity market will continue its rally when trading begins tomorrow. That's because Microsoft (MSFT 53.40 +2.63)-- the most influential company on tonight's calendar-- checked in with better than expected earnings and a reassuring outlook.
Citing broader customer adoption of its licensing programs than anticipated, MSFT posted a fiscal Q1 (Sep) profit of $0.55 on revenues of $7.75 bln, easily surpassing the Multex consensus estimates of $0.43 and $7.1 bln, respectively. In turn, MSFT raised its expectations for full-year sales and earnings results, which provoked a sense of relief among investors that the worst of the IT spending slowdown may be behind the market. At the very least, it showed that MSFT continues to execute in envious fashion.
6:21PM September 2002 Semi Book-to-Bill Ratio of 0.84 : North American Semiconductor Equipment Industry posts September 2002 book-to-bill ratio of 0.84; Lehman estimate 1.06 vs August actual 1.14, indicating that it was worse than expected.
5:49PM Sun Microsystems lowers capex spending (SUNW) 2.99 +0.19: -- Update -- On conference call, mgmt lowers FY03 capex to under $500 mln from approximately $2 bln in FY02.
5:20PM Sun Microsystems stresses challenging demand environment (SUNW) 2.99 +0.19: -- Update -- On conference call, mgmt continues to stress challenging demand environment and tough pricing competition; company saw more weakness in US operations than international in 1Q03 (Sep) and adds that the last 3 weeks of 1Q did not see the normal uptick in demand.
4:55PM Sun Microsystems (SUNW) 2.99 +0.19: -- Update -- On conference call, company announced it will not see a return to profitability in 1H03 and plans to reduce its workforce by approximately 11% from its 1Q03 (Sep) levels. As a result of such actions, mgmt now expects to reach profitability in 2H03.
4:03PM Sun Microsystems tops estimates (SUNW) 2.99 +0.19: Reports Q1 (Sep) loss of $0.02 per share, $0.01 better than the Multex consensus of ($0.03); revenues for the first quarter were $2.7 billion vs the consensus of $2.8 billion.
5:39PM Siebel Systems misses estimates (SEBL) 7.29 +0.54: Reports Q3 (Sep) earnings of $0.03 per share, $0.02 worse than the Multex consensus of $0.05; revenues fell 18.4% year/year to $357.2 mln vs the $362.2 mln consensus.
5:24PM PeopleSoft guides Q4 in-line to slightly higher (PSFT) 16.36 +1.51: -- Update -- On call, says it expects Q4 EPS of $0.14-0.15 (Multex consensus $0.14) and license revenue to increase to $125-135 mln... guidance was prefaced by remark that it is still very challenging to make predictions... PSFT +0.84 at 17.20
5:22PM Check Point Sftwr guidance (CHKP) 16.73 -0.45: -- Update -- Dow Jones reporting that company guides to $0.23-0.25 EPS and $100-108 mln revenues for Q4, below Multex consensus estimates of $0.26 and $112 mln; stock -1.13 to 15.60 after hours.
5:08PM Intersil sued by Agere regarding 6 WLAN patents (ISIL) 17.12 +1.94:
5:04PM Applied Micro reinstates $200 mln buyback (AMCC) 3.72 +0.39: Announces that its Board of Directors has reinstated its stock repurchase program and approved the repurchase of up to $200 mln of its common stock.
4:56PM Atmel misses by 3 cents (ATML) 1.60 +0.20: Reports Q3 (Sep) loss of $0.12 per share, $0.03 worse than the Multex consensus of ($0.09); revenues rose 1.3% year/year to $298.7 mln vs the $300.4 mln consensus.
4:51PM McDATA beats by 3 cents (MCDT) 6.19 +0.90: -- Update -- Reports Q3 EPS of $0.02, $0.03 better than the Multex consensus; revs were $80.9 mln, vs consensus of $81.5 mln.
4:49PM Mercury Interactive matches estimates (MERQ) 23.24 +1.91: Reports Q3 (Sep) earnings of $0.16 per share, in line with the Multex consensus of $0.16: revenue for the third quarter was $97.9 million vs consensus of $97.2 million.
4:46PM Integrated Device matches estimates (IDTI) 9.70 +0.50: Reports Q2 (Sep) earnings of $0.01 per share, in line with the Multex consensus of $0.01; revenues rose 0.5% year/year to $92.3 mln vs the $92.3 mln consensus.
4:44PM Sybase matches estimates (SY) 12.58 +0.28: Reports Q3 (Sep) earnings of $0.26 per share, in line with the Multex consensus of $0.26; revenues were $203.01 mln vs the $205.9 mln consensus.
4:39PM Gateway matches estimates; guides lower (GTW) 2.95 +0.26: Reports Q3 (Sep) loss of $0.15 per share, in line with the Multex consensus of ($0.15); revenues fell 20.7% year/year to $1.12 bln vs the $1.10 bln consensus; company estimates the amount of the net loss per share to improve from the $0.15 experienced this quarter to a range of $0.10 to $0.13 for the fourth quarter -- Multex consensus estimate is for a net loss of $0.09 per share.
4:33PM Xilinx beats by a penny, issues guidance (XLNX) 17.11 +1.00: Reports Q2 EPS of $0.11, $0.01 better than the Multex consensus; revs were $277.9 mln, vs consensus of $274.9 mln. Expects Q3 revs of $278-$285 mln, vs consensus of $287.1 mln.
4:23PM Fairchild Semi tops estimates (FCS) 8.79 +0.44: Reports Q3 (Sep) earnings of $0.09 per share, $0.01 better than the Multex consensus of $0.08; revenues rose 10.8% year/year to $360.6 mln vs the $355.8 mln consensus; that our fourth quarter revenues will be down as much as 4-6% from the third quarter -- -- Multex consensus estimate is for revs of $355.8 mln.
4:23PM Microsoft beats big either way (MSFT) 50.75 +0.63: -- Update -- Sep qtr EPS of $0.50 actually included a nickel charge, and was therefore $0.55 excluding this charge. We do not yet know if analysts had included this charge in estimates; either way Microsoft beat big on both the top and bottom lines, it's just a matter of whether they beat the EPS consensus by 7 cents or 12 cents. Stock up 2.7% to 52.14 after hours.
4:20PM Broadcom reports in-line Q3 (BRCM) 12.45 +0.95: -- Update -- Reports Q3 pro forma loss of $0.03, in line with the Multex consensus; revs were $290.0 mln, vs consensus of $289.3 mln.
4:20PM Microsoft guidance (MSFT) 50.75 +0.63: -- Update -- Company guides Dec qtr to $8.5-8.6 bln in revenues, above the Multex consensus of $8.45 bln; guides EPS to $0.45-0.46 vs consensus of $0.50; unclear if there are any unusual items in this EPS guidance. FY03 seen at $32.2-32.6 bln and $1.89-1.95 vs consensus estimates of $31.9 bln and $1.89.
4:17PM Scientific-Atlanta misses by 8 cents (SFA) 13.33 -0.06: Reports Q1 (Sep) earnings of $0.13 per share, $0.08 worse than the Multex consensus of $0.21; revs were $311.6 mln, vs consensus of $361.3 mln.
4:17PM PeopleSoft beats by $0.02 (PSFT) 16.36 +1.51: Reports Q3 earnings of $0.14 per share, $0.02 better than the Multex consensus. Revs fell 9.5% to $471.2 mln (consensus $469.76 mln).
4:17PM Microsoft reports fiscal Q1 (MSFT) 50.75 +0.63: -- Update -- Reports EPS of $0.50 and revenues of $7.75 bln, well ahead of Multex consensus estimates of $0.43 and $7.1 bln; haven't yet confirmed that $0.50 figure is comparable to estimates, though revenues clearly beat.
4:15PM Lam Research beats by 2 cents (LRCX) 9.67 +0.98: Reports Q1 (Sep) earnings of $0.02 per share, $0.02 better than the Multex consensus of $0.00; revs were $197.5 mln, vs consensus of $193.0 mln. "... Demand drivers for integrated circuits remain uncertain with market researchers expecting continued weakness in the PC and communications markets."
4:12PM PMC-Sierra beats by a penny (PMCS) 4.47 +0.70: Reports Q3 (Sep) loss of $0.05 per share, $0.01 better than the Multex consensus of ($0.06); revs were $59.6 mln, vs consensus of $60.8 mln.
4:11PM Pixelworks beats by a penny (PXLW) 4.40 +0.41: Reports Q3 (Sep) earnings of $0.04 per share, $0.01 better than the Multex consensus of $0.03; revenues rose 11.6% year/year to $26.9 mln vs the $26.3 mln consensus. Sees Q4 revenues of $27.5-29.5 mln vs Multex consensus of $29.6 mln.
4:06PM Cree beats by a penny (CREE) 13.10 +1.24: Reports Q1 (Sep) earnings of $0.05 per share, $0.01 better than the Multex consensus of $0.04; revenues rose 13.1% year/year to $48.8 mln vs the $45.2 mln consensus. CEO says company is targeting LED sales to be above record levels set in Sep qtr.
3:46PM Celestica (CLS) 11.88 -0.12: Investors continue to back off EMS stocks as enterprise weakness looks like it will continue through Q4: CLS reported Q3 results inline with the preannounced ranges and lowered Q4 guidance to $1.7-1.9 bln in revenue and $0.13-0.21 EPS. CSFB believes CLS's weak Q4 guidance proves that the order cancellations (totaling $300 mln) were not one-time in nature, and point to future revenue and margin deterioration. Bear Stearns downgrades to PEER PERFORM from Outperform and cuts their FY03 estimate to $0.71 from $1.10 and also reiterates caution on SANM despite its valuation.
3:43PM Apple Computer (AAPL) 14.09 -0.47: Encouraged by AAPL's in line qtr, analysts nonetheless advise investors to stay on the sidelines after co warned for the Dec qtr. CSFB maintains their Neutral rating, noting total unit shipments of 734,000 were below their expectations and underscore the weak performance of the 8 month old 15-inch iMac and professional PowerMacs. Prudential lowers their FY03 estimate to $0.20 from $0.55 due to higher expense levels and margin compression and would look for new product cycles before becoming more positive on the shares. UBS Warburg is more upbeat and reiterates their Strong Buy rating, although stipulating that "our only disappointment is that mgmt is doing little to lower expenses and manage profitability" citing AAPL's $4.3 bln cash.
2:49PM Symantec (SYMC) 38.50 +2.94: Operating in a weak tech segment, SYMC delivered a blow-out qtr (beat Q2 consensus estimate by $0.07) and boosted Q3 guidance to $0.38 EPS and $335-355 mln revenues vs. consensus of $0.35 and $336.5 mln. Analysts reiterate their confidence in co's sustained growth: CSFB raises their 2003 and 2004 estimates above SYMC's projections and raises their price target to $44 from $42 citing SYMC's recent announcement of an OEM deal with HPQ. Prudential similarly boosts their 2003 forecasts and price target to $44 on SYMC's customer and consumer strength.
2:33PM Advanced Micro (AMD) 4.28 +0.79: Short-covering is the theme of the day for AMD (+23%), who missed consensus estimates by $0.07 in last night's Q302 earnings report; analysts forecast challenging Y03, despite significant cost-saving efforts and company's Q4 guidance of 20% advance in revenues. Thomas Weisel reiterates Mkt Perform rating, but remains "respectfully sceptical" until cost-cutting efforts gain visibility with respect to their affect on product ramp, brand awareness, and market share; recommends investors remain on sidelines. CIBC shares in that sentiment; thinks management's targets are too aggressive; reiterates Sector Underperform rating; suggests investors sell into any near-term strength.
12:02PM Philly Fed weaker than expected : The Philly Fed index fell to -13.1 in October from 2.3 in September, much weaker than the consensus of -4.0. This index has been very volatile in recent months, and while its indication of a soft manufacturing sector has been accurate, it has not done a good job of projecting the magnitude of the weakness. The market is already turning lower on this report, though this report shouldn't have that much impact given its dubious predictive power.
1:55PM QLogic (QLGC) 28.05 +4.77: Stock jumps over 20% after beating the Street last night and raising Q4 numbers to $0.25-0.29 and +2-5% revenue q/q; Morgan Stanley is increasingly confident co will continue to outperform under less than optimal circumstances. SG Cowen raises estimates and believes shares represent an excellent buying opportunity as QLGC is gaining share ... Goldman Sachs's Laura Conigliaro bucks the trend and lowers CY03 estimate $1.17 from $1.25 citing a continuation of the IT spending downturn; sees increased risks to SAN growth and assumes a more cautious stance.
1:24PM Cisco Systems (CSCO) 10.63 +0.82: Stock surges over 8% on last night's encouraging report from IBM and this morning's bullish note from Banc of America; firm believes stock is at an attractive level for long-term investors; concedes that day-to-day volatility will likely continue but puts downside risk at approx $8 while assigning an $18 price target. B of A believes CSCO can maintain relatively strong margins and cash flow generation even with a prolonged downturn; notes that during co's worst sequential decline (Apr 2001 qtr), sales fell 30% sequentially, but gross margins were still above 54%, CSCO generated almost $1.9 bln in operating cash flow, and tangible book value was $2.82 per share .. adds that book value has increased every qtr since.
9:28AM Nasdaq Composite levels of interest : -- Technical -- Pre-market indicators are off their best level of the morning but are still pointing to a test of resistance in the 1267/1270 (50 day sma, 50% retrace of Aug/Oct slide) area in early action. Next resistance is at the initial recovery high of 1281 followed by the 1292/1295 area.
9:22AM Industrial Production fell 0.1% vs +0.1% consensus : Production was weaker than expected in Sep, falling 0.1% instead of the expected 0.1% increase. The capacity utilization rate fell a tenth to 75.9%. Though slightly weaker than expected, this report will probably not dampen the market's enthusiasm, as the manufacturing sector has been sluggish throughout the year.
11:18AM Technical Levels : Okay, so two days ago we made a big issue over the Nasdaq and whether it could clear its 50-day simple moving average. Then yesterday, we addressed the issue of what to watch for on the massive, Intel-induced sell off. Now early today, it looks as if we're essentially back to square one -- the Nasdaq has gapped back above its 50-day simple moving average, and the way it responds to this level will almost definitely to contribute to the near-term bias.
Yet while the 50-day simple moving average is important, we also want to avoid a laser focus on this one particular level. In assessing the market reaction today, it's also worth considering the internal picture on yesterday's sell off. Total volume traded was somewhat lighter yesterday, and market internals -- while bearish -- were not hitting extreme bearish readings.
More specifically, the Nasdaq traded just under 1.4 billion shares yesterday and declining volume outpaced advancing volume by about 5.5 to 1. By way of comparison, on Tuesday's rally, over 1.7 billion shares were traded on the Nasdaq and advancing volume outpaced declining volume by nearly 10 to 1. So what about today? As this is written, advancing volume outpaces declining volume by about 13 to 1 and the Nasdaq is on pace to comfortably surpass 2.0 billion total shares traded.
What all this suggests is that for the time being, the near-term bias should remain higher so long as any upcoming sell pressure is orderly and no significant technical damage is done. So what do we mean by 'near-term bias'? Well, looking out over at least the next week or two the technical picture favors additional upside.
And this leaves us with the matter of the straight technical levels. On the Nasdaq, look for the 1,265 to 1,268 range to serve as a notable pivot point near term. This area brackets its well documented 50-day simple moving average as well as a 50% retracement of the prior leg higher. After that, watch for additional overhead in the vicinity of 1,300 which matches up with prior chart congestion.
Looking out more broadly, a big point of interest to the upside will be significant overhead in the area of 1,419 to 1,423. This area is notable as it coincides with three points of interest over the prior five years -- 1) the September 11th-induced reaction lows which bottomed at 1,423, 2) the reaction lows of October 1998 which bottomed at 1,419 and 3) the ordinary course of its original uptrend during the Summer of 1997. Yet of more immediate interest, this area also happens to mark -- almost precisely -- the top of the prior leg higher which closed on August 22nd at 1,422.95.
To the downside, look for initial support at congestion in the area of 1,250. After that, there should be notable support in the range of 1,228 to 1,234 which approximates a 38% retracement of the prior leg higher and also matches with modest congestion. That's followed by even more significant support at 1,214 which approximates the index' 20-day exponential moving average. -- Mike Ashbaugh, Briefing.com
10:52AM IBM (IBM) 71.60 +6.70 (+10.32%) Overall, last night's report from IBM is being seen as very positive for the market as a whole, and even being viewed as a balance point to Intel's weak report a couple of day's ago. However, this reading is too simplistic. There are some high level trend considerations to consider in IBM's report.
On the tech market: IBM's report does not support the idea that the tech market is rebounding. Although we have already heard some people state this interpretation, frankly, it is not in the report, if you actually read it. In fact, the report supports the idea that the tech market is far from rebounding - and is likely to remain stalled for as far into the future as anyone can see. On revenues: TOTAL REVENUE: DOWN 2% ($19.8 billion) - Software DOWN 2.9% (16% of total rev); hardware sales FELL 0.9% (15% of total revenue); Printers DOWN 3.3% (14% of total); Microelectronics (components) ROSE 3.3% (5% of total revenue.) The only big bright spot is services: ROSE 2.4% (45% of revenues). See the table summarizing this below.
On the tech market: EMC's (EMC) report provides further evidence that the technology market overall is not on the verge of rebound. EMC's sequential revenue decline of 9% simply can't be viewed as an indication of rebound. Add to that CEO Joe Tucci's frank statement The IT spending drought got even worse..., throw in the Intel report, consider the IBM division-by-division reports, and the tea leaves add up to one thing: the overall technology market shows no signs of improvement on the horizon. Don't be mislead by the reports of a rosy future - for IBM they will come from being a services (outsource and consulting) company that also sells technology. In fact, IBM sees hard disk drives as a commodity product - and is selling the division to Hitachi.
Tech market shift: A higher level clue is visible in IBM's report: the technology market is shifting from value creation by the technology vendors to value creation from the application of technology. This is a theme that Briefing.com has been stressing for some time - ( the most recent discussion is the Stock Brief of 13-Aug-02 Technology Is Good Enough; Won't Be A Growth Engine ) and the IBM report shows it. Frankly, ex-CEO Louis Gerstner deserves far more credit than he has gotten for successfully leading IBM into this new shift - he saw this shift coming in his first year at IBM - and he got the battleship turned around in shallow waters. It is pretty clear, with nearly half of its revenues derived from services, that IBM is now more like EDS than the old IBM. Long term, this aligns IBM with the trends in the tech market - but people still view IBM casually as the biggest computer vendor in the country. They aren't - they are the biggest vendor of the end-result of computers - information systems.
Business line visibility: Another interesting trend in IBM's release - a clear view into the operating lines of the company. It shows that IBM understands the demand form investors into line-of-business visibility. This is a trend we pointed out in a Stock Brief of 23-Sep-02 What's Out/What's In - The Style Changes On Wall Street. We need more companies to start doing this.
Overall market impact: Bellwether IBM is having a positive effect on the overall market - but probably for the wrong reasons. Nevertheless, you should view it positively, - but mainly for IBM itself - do not make the mistake of thinking it is an indicator for other technology vendors - particulary hardware vendors. That's being pushed by some - but it is the wrong view.
- Robert V. Green
finance.yahoo.com^SOXX+AAPL+AGRa+ALTR+AMAT+AMCC+AMD+ATML+BRCM+CHKP+CLS+CREE+CSCO+GTW+IDTI+INTC+ISIL+KLAC+LLTC+LRCX+LSCC+LSI+MCDT+MERQ+MOT+MSFT+MU+MXIM+NSM+NVLS+PMCS+PSFT+PXLW+QLGC+SEBL+SFA+SUNW+SY+SYMC+TER+TXN+XLNX+^VIX+^IXIC+^SPX&d=t
RtS |
