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Wall Street Beat: Confidence in tech sector high despite mixed earnings

Nasdaq tech shares hit their highest point since the third quarter of 2000, despite bad news from Cisco and warning from Lenovo

By , IDG News Service
February 14, 2014 05:21 PM ET

IDG News Service - Despite some shadows cast by Lenovo and Cisco earnings, IT stocks have had a strong week overall, with Nasdaq tech stocks reaching their highest point since the third quarter of 2000, during the dot-com bust.

On Wednesday, Lenovo reported that for the fourth quarter, net profit jumped 30 percent year over year to US$265 million, while net sales rose 15 percent to $10.8 billion. Tablets were star performers, as sales of the devices increased 326 percent year-over-year to 3.4 million units.

Considering the global weakness in the overall hardware market, the company had good news for PCs as well. The company said it shipped 17.3 million mobile devices in the quarter, up from 15.3 million PCs a year earlier.

The company has been also been growing by acquisition, recently announcing planned purchases of Google's Motorola Mobility and IBM's low-end server unit. The bad news is that the company said it expects its profit will drop in the short-term with the proposed acquisitions.

Though the company's shares have faltered on the news of the aggressive purchases, it is not traded on major U.S. exchanges.

Networking bellwether Cisco Systems also announced earnings Wednesday, reporting that profit for the three months ending Jan. 25 plunged by 54 percent to $1.4 billion. Revenue declined by nearly 8 percent to $11.2 billion.

In addition, revenue for the current quarter will again be lower than it was a year earlier, by between 6 percent and 8 percent, Chairman and CEO John Chambers said on a conference call.

Reflecting concerns that have hit the stock market since the start of the year, Chambers said that in emerging markets such as Brazil, Russia, India, China and Mexico, product orders were down by about 10 percent.

But Cisco expects growth to come back later this year as it adjusts its product line to take advantage of the increasing number of devices connected to the Internet. Cisco has been in transition as it adjusts to this trend, he said.

"In our view, this next wave of the Internet, the Internet of Everything, will encompass every technology transition we are seeing in the market today, with the network squarely at the center," Chambers said on the call. "We are building the platform for the Internet of Everything with scale and security to address the unparalleled complexity requirements. We plan to continue to disrupt the market and disrupt ourselves to deliver the value and solutions our customers require."

Market research reports back up the notion that the "Internet of things" is expanding rapidly. "The global market for connected devices that allow users to access the Internet is set to surpass 6 billion units this year, as new products including cellphones, tablets and computers enter the electronics ecosystem," according to a new report from IHS Technology.

Global production of connected equipment will total 6.18 billion units in 2014, an increase of 6 percent year over year, IHS said. "This will be the largest increase for the market in four years, surpassed only by the 10 percent hike in production during 2010, a year after the global economic recession ended," according to the report.

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