Wall Street Beat: Tech makes gains on solid sales reports

The sector helps boost markets to multiyear highs

Solid sales reports from companies as diverse as Akamai, LinkedIn and NCR as well as positive economic data buoyed shares of IT companies Friday as markets closed in on multiyear highs.

The Standard and Poor's 500 index closed Friday at a five-year high while the tech-heavy Nasdaq exchange closed three points short of its highest point since November 2000. The Nasdaq Computer Index closed at 1593.06, up by 17.34, as shares of Apple, Microsoft, Hewlett-Packard, Oracle, Intel and Google posted gains.

Strong economic news helped fuel the rise. U.S. government data, for example, showed the trade deficit shrank in December to US$38.5 billion, its narrowest in almost three years. But tech company earnings also helped boost markets.

Professional social-networking site LinkedIn was the tech star of the week, reporting quarterly financial results after the market closed Thursday. Revenue for the fourth quarter was $303.6 million, an increase of 81 percent year over year, while net income was $11.5 million, compared to net income of $6.9 million for the fourth quarter of 2011. Company shares jumped by $26.39 to close at $150.48.

Analysts had good things to say about the company's position. "We believe its competitive position and business momentum are very strong," wrote Canaccord Genuity analyst Michael Graham. " Potential positives: continued ramp in member engagement from new and better products/features; our expectation for a 23-point deceleration in 2013 revenue growth from 82% to 59% appears very reasonable."

LinkedIn's success seemed to put investors in an optimistic mood for other social-network-oriented Internet stocks. For example, shares of local business review site Yelp, which also reported earnings this week, rose $0.50 to $21.85 Friday. Yelp announced earnings Wednesday, reporting that net revenue for the fourth quarter was $137.6 million, an increase of 65 percent year over year. Net losses declined to $19.1 million, compared to a net loss of $16.9 million a year earlier.

Meanwhile, China-based search and Internet services giant Baidu posted a 36 percent year-over-year quarterly net profit of 2.8 billion yuan (US$445 million), the company reported on Tuesday. Total revenue jumped 42 percent to 6.335 billion yuan.

Baidu in October projected revenue between 6.155 billion yuan and 6.345 billion yuan. Shares took a dip despite the profit gain as investors appeared to be worried about increasing expenses and slowing growth -- the same problems that have plagued Facebook. Shares (American depository receipts) of the company rose Friday again, however, along with the rest of the market, closing at $96.86, up by $0.59 on the Nasdaq.

In enterprise tech news, cloud platform provider Akamai this week reported fourth-quarter revenue of $378 million, up 17 percent year over year; and fourth-quarter net income of $68 million, up 14 percent year over year. Akamai CEO Tom Leighton ascribed the strong results to delivery of new products across the entire breadth of the company's portfolio.

NCR shares shot to a 52-week high Friday after it reported a 3 percent sales increase, to $1.64 billion. Mainly due to remediation payments related to an environmental case, the company reported a net loss. However, the company said its full-year revenue should increase a hefty 9 percent to 11 percent. The forecast drove up shares by $1.22 to $29.18 Friday.

Dell shares rose this week after the announcement that Michael Dell has joined forces with investment firm Silver Lake to buy the company he founded as a 19-year-old in 1984, in a deal valued at about $24.4 billion. The transaction calls for Dell shareholders to get $13.65 in cash. Though the company was careful to say that it was putting a 25 percent premium on shares over Dell's closing price on Jan. 11, when rumors of a deal first appeared, some analysts said the offer was low.

Wells Fargo analyst Maynard Um for example said a fair price for a leveraged buyout would be about $15 per share, given the company's recent drab stock performance.

With Dell forecasting a close to the deal in the third calendar quarter this year, it may be a signal that it expects to face some challenges. On Friday, Dell investor Southeastern Asset Management said it won't support the buyout, marking possibly the first shot in a tough battle to close the buyout.

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Marc Ferranti

IDG News Service
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