Wall Street Beat: Google, Intel, AMD stoke market

Indexes jump Friday morning on upbeat earnings news

Google, Intel and Advanced Micro Devices earnings this week bolstered tech shares even as concerns about PC sales and financial companies weighed on markets.

Tech stocks flagged in the third quarter as fears of a double-dip recession sapped investor confidence. But the IT sector helped buoy markets after the U.S. Labor Day holiday, leading to the best September for U.S. equities in 70 years. Though macroeconomic concerns still cloud markets generally, the tech sector helped brighten the picture this week.

Google is typically the star of any week in which it announces results. It was no different this week when Google, announcing results Thursday, reported gross revenue of US$7.29 billion in the quarter ending Sept. 30, an increase of 23 percent from one year earlier. Net income jumped 32 percent to $2.17 billion. Both revenue and profit beat analyst estimates.

While Google continues to dominate the online search ad market, its reliance on that business has raised concerns for some company watchers. But last quarter, the company made strides in other types of advertising.

"Our core business grew very well, and our newer businesses -- particularly display and mobile -- continued to show significant momentum," said Eric Schmidt, CEO of Google, in a statement.

Google said on a call with analysts that display ads are in a position to generate more than $2.5 billion in revenue and mobile ads $1 billion, over the next year.

The Google announcements followed a Tuesday report from the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) that said online ad revenue increased 11.3 percent to $12.1 billion during the first six months of the year, compared with the year-earlier period.

While the news about Internet ad sales is bound to cheer investors in the sector, the big question for tech this week centered around the chip market. Analysts have cut forecasts for hardware and components for the end of the year as rapid growth in the first quarter gave way to softening demand in the last few months.

In a survey announced Wednesday, IDC confirmed the trend, reporting that PC shipments in the third quarter amounted to 89.3 million units. Though the shipments represented a 10.5 percent increase over the poor, recession-plagued results a year earlier, they were about 3 percent below the company's forecasts. Though IDC did not include shipments of tablets, a hot market since Apple launched the iPad, they did indicate that consumer spending flagged somewhat midyear.

However, though Intel appears to remain cautious about consumer spending, it was bullish on corporate demand when it issued quarterly results Tuesday. Intel said third-quarter profit rose 59 percent to $2.96 billion while revenue rose 18 percent to $11.1 billion.

"Intel's third-quarter results set all-time records for revenue and operating income," said Paul Otellini, Intel president and CEO, in a statement. "These results were driven by solid demand from corporate customers, sales of our leadership products and continued growth in emerging markets. Looking forward, we continue to see healthy worldwide demand for computing products of all types.

AMD, reporting third quarter results Thursday, narrowed its loss from the same period a year earlier. The Intel rival reported a net loss of $118 million, better than its $128 million loss for the third quarter in 2009.

Excluding one-time items including a noncash, equity loss from its manufacturing spin off, GlobalFoundries, AMD would have reported a profit of $108 million. AMD also said revenue for the third quarter was $1.62 billion, up from $1.4 billion a year earlier. Both earnings and sales beat analyst estimates.

A sign that chip makers themselves are ramping up to meet future demand came from ASML, a Dutch company that makes lithography systems, which are used in the production of integrated circuits. ASML said third quarter sales totaled €1.176 million (US$1.6 million), up from €555 million a year earlier, while net income came in at €269 million, up from €20 million in the 2009 period.

The generally upbeat news from the tech sector appeared to offset, to a certain extent, concerns about unemployment and mortgage foreclosures. Share prices fell broadly Thursday after new Labor Department figures showed that initial claims for unemployment rose last week. In addition, shares of major U.S. banks declined over worries about practices related to home mortgage foreclosures. However, several major indexes opened higher Friday morning. In early trading, the tech-heavy Nasdaq was up by 16.88 points to 2451, the S&P 500 was up by 2.68 to 11,098. The broad Dow Jones Industrial Average slipped by 2.42 to 11,092. Computer stocks, in particular, seem to have recovered their momentum lately. Nasdaq computer stocks closed Thursday up by 6.44 for the year.

Copyright © 2010 IDG Communications, Inc.

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