Shares of Yahoo Inc, International Business Machines Corp and Texas Instruments Inc may rise after the companies reported profit gains that sparked optimism for growth across the technology industry.
Yahoo, owner of the most-used US Internet site, posted a 16 percent gain in profit as advertising sales rose. IBM, the world's largest computer services provider, said net income rose 22 percent and Dallas-based Texas Instruments, the biggest maker of chips for mobile phones, reported a 42 percent profit gain.
The results were a relief for some investors concerned this reporting period may echo last quarter, when companies including Sunnyvale, California-based Yahoo and Texas Instruments issued disappointing forecasts. The announcements mark the start of earnings season for technology companies. Intel Corp and Apple Computer Inc were to follow yesterday and Google Inc reports today.
"We're back on track," said Chuck Jones, an analyst in San Francisco at Atlantic Trust Stein Roe, which manages US$16 billion in assets, including shares of Yahoo, IBM and Texas Instruments. "I think overall, things are going pretty fine."
Shares of Yahoo jumped US$1.92, or 6.1 percent, to US$33.22 in extended US trading Tuesday. Armonk, New York-based IBM gained 81 cents to US$84.12. Texas Instruments rose US$1.18 to US$35.18.
Schaumburg, Illinois-based Motorola Inc, the No. 2 mobile-phone maker behind Nokia Oyj, bucked the trend by reporting a drop in profit after stock-option expenses and a narrowing of margins. The shares declined 5 percent.
"Overall, results are off to a solid start," said Chris Baggini, who helps oversee about US$1.4 billion for Gartmore Global Investments in West Conshohocken, Pennsylvania.
Continued optimism may hinge on Santa Clara, California-based Intel, the world's largest maker of semiconductors, and Apple, maker of iPod music players and Macintosh computers. Both companies disappointed with their forecasts last quarter.
Intel is expected to report its biggest decline in profit and sales in four years as competitor Advanced Micro Devices Inc steals market share. Cupertino, California-based Apple is likely to report a 35 percent rise in profit, its slowest in nine quarters.
"This is the first true day of tech earnings, so it's a little hard to say," Jones said. "We've got two more big days in front of us."
Results so far, while not spectacular, "reflect solid, fundamental business conditions," said Michael Cuggino, who helps manage US$575 million for four mutual fund portfolios at San Francisco-based Pacific Heights Asset Management.
Companies such as Intel and Apple may benefit from investors' low expectations, a situation that helped Yahoo outperform Tuesday.
Yahoo said profit rose as companies spent more promoting their brands online. Net income rose to US$159.9 million, or US$0.11 a share, from US$137.9 million, or US$0.09, a year earlier. Both periods include stock-based compensation costs.
The shares rallied after Yahoo forecast sales this quarter that may exceed analysts' estimates.
First-quarter sales rose 34 percent to US$1.57 billion, easing concerns that Google's growth may be crimping revenue at Yahoo.
The results from Yahoo bode well for Mountain View, California-based Google, the most-used Internet search engine, Goldman, Sachs & Co analyst Anthony Noto wrote in a research note. Yahoo's growth in Internet search ads suggests Google could exceed estimates, according to Noto.
IBM's profit of US$1.08 a share beat most analysts' expectations. The company boosted gross profit margins for the seventh straight quarter as Chief Executive Officer Sam Palmisano cut jobs and sold the unprofitable personal-computer unit. Sales slipped 9.8 percent to US$20.7 billion reflecting the PC unit sale.
IBM is shifting resources to India, China, Russia and Brazil, countries where sales are growing fastest. Expansion there helped offset continuing declines in traditional markets including Japan and Germany.
Texas Instruments' profit rose to US$585 million, aided by sales of higher-priced, next-generation handsets and inexpensive cell phones to consumers in India and China. Sales increased 23 percent to US$3.33 billion.
The company's gross margin, or percentage of sales after production costs, expanded to 50 percent from 46 percent a year earlier. Chief financial officer Kevin March told analysts on Tuesday there were signs that the gross margin could expand further.
The company forecast second-quarter profit of US$0.38 to US$0.43, topping the US$0.36 average estimate of 36 analysts in a survey by Thomson Financial.
"Our visibility and confidence" have increased following the first quarter's results, March said.
While Motorola benefited from the same demand that spurred Texas Instruments, the phone maker reported a drop in net income. Profit fell to US$686 million, or US$0.27 a share, from US$692 million, or US$0.28 a year earlier. Sales rose 23 percent to US$10 billion.
The company shipped a record number of handsets as it balanced demand for cheap phones in emerging markets with consumer lust for sleek models elsewhere.
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