The economy is in bad shape. GDP down, unemployment up. Earnings down, layoffs up. But let’s take a second to dissect the kingpins in one sector of the stock market – Tech. Is it sector weakness, or one bad “Apple?”
International Business Machines (IBM): Currently $90.07
IBM reported a strong bottom line number of $3.28 per share for the quarter vs analyst estimates of $3.03. However, the top line revenue number of $27 billion was weaker than the $28.15 billion expected. Service revenue provided strength relative to expectations, but currency translation offset. Improved gross margins of 47.9% and the substantial benefit of a lower tax rate delivered the strong net earnings number.
Apple, Inc. (AAPL): $88.36
Apple reported revenue for the quarter of $10.17 billion and earnings per share of $1.78 vs estimates of $9.74 billion and $1.40 respectively. Strong sales of Mac computers, roughly 2.5 million, and strong gross margins, 34.7%, helped during the holiday season. Though the data does not conclusively indicate it, it certainly appears Apple is doing a fantastic job of converting PC users to Mac on the heels of the iPod and iPhone. Of course, the health of Steve Jobs is a concern though the company states he will remain involved in all key strategic decisions.
Google, Inc. (GOOG): $306.50
Google reported after the bell on Thursday, beating analyst estimates on both the top and bottom line on strong search growth combined with a new found ability to reign in expenses. Earnings per share were $5.10 vs $4.96 estimates and revenue was $4.2 billion vs $4.12 billion estimates. The company also announced a one-for-one stock option swap program aimed at retaining employees.
Microsoft, Inc. (MSFT): $17.11
Microsoft, reportedly because of leaks, decided to pre-announce earnings Thursday morning instead of the scheduled Thursday afternoon. Earning per share fell short at $0.47 vs $0.49 estimates. Revenue also fell short at $16.63 billion vs $17.08 billion estimates. Despite strength in the server and entertainment (think XBOX) divisions, unexpected weakness in the PC business and a net loss in the online services business hurt results. The company also announced layoffs of 5,000 employees along with other cost cutting measures.
The interpretation of these results should always be left for the individual investor’s determination. However, with unexpected strength in IBM, Apple, and Google, maybe there isn’t all the weakness everyone thought there would be in the Tech sector. Perhaps, it’s simply one bad “Apple,” Microsoft.