Today was full of surprises as tech stocks mostly rallied depite Ciscois disappointing results announced yesterday. Most analysts were expecting Ciscois results to hang like a cloud of acrid smoke over the markets today, bringing doom and gloom to all who inhaled its poisonous vapors. Perhaps thatis a slight exaggeration, though not much of one, but the fact remains that many investors seem to have taken Ciscois results as some sort of twisted bit of good news. This quote from a Reuters report is representative from what we heard and read from several sources:
"Even though they (Cisco) have missed lowered guidance, the Street is looking and thinking perhaps this is the worst case scenario," said Charles Payne, chief executive at Wall Street Strategies. "Just the fact that we were able to come off the canvas this morning shows there is demand for stock and that the mind-set is changing."
CPI data was also released today, with inflation for March pegged at .1% and the Core CPI (CPI data excluding food and energy) heading up .2%. That was not only in line with expectations, it shows that inflation is firmly in control. Todayis data makes it less likely that the Fed would be offering any kind of rate cut ahead of its next scheduled meeting on May 15th. The end result for the markets were that both the Dow and the Nasdaq closed higher today, though both also dipped back and forth over the opening mark throughout the day.
Intel reported after the bell today. The company reported better than (lowered) expected results, though profits fell a resounding 64% from the year before and sales were down some 16%. The word from a CBS Marketwatch report:
The worldis largest chipmaker said its net income in the period, minus acquisition-related costs, totaled $1.1 billion, or 16 cents a share, vs. $3 billion, or 43 cents a share, in the first quarter of 2000. The First Call/Thomson Financial consensus estimate on Intelis profit was 15 cents a share on sales of $6.59 billion. On a year-over-year basis, though, Intelis first quarter net income fell 64 percent, while its EPS slid 63 percent. Overall sales fell to $6.7 billion, or 16 percent, from $8 billion last year, with microprocessor and chipset unit shipments lower than in the fourth quarter.
Shares of Intel jumped more than 11% in after hours trading. Intel also warned that the June quarter was likely to be slow, but said it expected the second half of the year to experience renewed growth. This has so far been met with enthusiasm by Wall Street, though it is tomorrowis trading that will test that theory. Coupled with the marketsi reaction to Ciscois poor results, tech stocks could be in for a nice rally tomorrow. Any negative news from a major company could quickly halt that, however.
Speaking of major companies, Apple and IBM will both be reporting tomorrow. Fellow Stock Watch reportee Akamai will be joining them. Apple was the recipient of some attention from Solomon Smith Barney analyst Richard Gardner who said he expected the company to meet expectations for the March quarter, but to have a tough time meeting June quarter expectations. We have provided a full report and analysis of his comments.
Morningstar also got into the game with a report on Apple and IBM. The title of their report emphasized the fact that neither company has warned for the current quarter. Like Gardneris much more detailed report, the Morningstar.com report warned that many Mac users may hold off buying a new Mac between now and MACWORLD as they instead opt to wait for new offerings in July that are expected to include Mac OS X pre-loaded. Select information from the Morningstar comments:
The company has promised to earn a profit in the March quarter, but given the extremely difficult environment in the PC business this past quarter, we remain skeptical. While brisk sales of Appleis new operating system for the Mac, the long-awaited OS X, could put the company over the top for the quarter, we are concerned that many potential customers could be holding off on buying new Macs until the summer, when OS X will start being preloaded on the computers. While a small operating loss at Apple wouldnit be a big concern for us, we would hate to see a return to profitability pushed off much further. In our opinion, the companyis cash hoard of $11 to $12 per share (as of December) has caused more confidence in the stock to build then it would have otherwise had. If Apple starts nibbling away at this cash supply, and if profitability starts slipping further into the future, we think investorsi nerves could become a bit frayed. We still like the shares at $20 or lower, but a big miss in the March quarter, or even a mild miss with profitability pushed far into the future, would force us to re-evaluate our position.
Talk about playing both sides of the fence. That is one non-committal communiqué. Apple will be Webcasting their quarterly results tomorrow. The consensus is that the company will meet consensus estimates. We think that Apple will benefit from meeting expectations, though Richard Gardner specifically recommended selling in the face of any gains after tomorrowis announcement. Overly negative guidance from Apple for the June Quarter (Appleis 3rd fiscal quarter) will also not bode well for investors.
Apple traded lower today on 50% higher volume than normal. The stock opened lower and proceeded to traded in a narrow range, mostly affected by the Solomon Smith Barney report, but managed to recover from being under the US$20 level in late afternoon trading. The dayis range was 19.60 - 21.21.
Apple closed at 20.4, down 1.04 (-4.85%) 12,238,500 shares trading hands.
The Nasdaq closed at 1923.22, up 13.65 (+0.71%), on volume of 1,901,165,000 shares trading hands.
The Dow closed at 10216.73, up 58.17 (+0.57%), on volume of 1,112,825,000 shares trading hands.
The S&P 500 closed at 1191.81, up 12.13 (+1.03%).
Akamai announced a new deal with NetIQ to offer a new service called Akamai SiteWise Service. The company will be announcing itis March quarter results tomorrow. AKAM closed higher at 8.55, up 0.15 (+1.79%), on light volume of 1,457,400 shares trading hands. Apple is a large shareholder of Akamai.
Adobe closed at 41.15, a gain of 0.32 (+0.78%), on light volume of 4,589,000 shares trading hands.
IBM will announce their earnings tomorrow, along with Apple and Akamai. The company is expected to meet expectations and is the only PC maker besides Apple to have not warned. The same Morningstar.com report we referenced above talks about IBM as well. IBM closed at 99.70, up 2.95 (+3.05%), on volume of 9,943,400 shares trading hands.
Motorola is one of the subjects of a nice report on the chip sector from Forbes. Note that Apple is not mentioned in the report. MOT closed at 14, up a quarter (+1.82%), on light volume of 13,318,700 shares trading hands.
Earthlink has been the subject of absolutely no buyout rumors for weeks... Whatis up with the rumor circuit of late? ELNK closed at 11.43, a loss of 0.35 (-2.97%), on light volume of 988,300 shares trading hands.
Gateway reports this Thursday. The stock closed at 15.46, down 0.19 (-1.21%), on light volume of 1,995,700 shares trading hands.
Dell closed at 26.35, down 0.76 (-2.80%), on light volume of 30,677,400 shares trading hands.
Intel closed at 26.04, down 0.26 (-0.99%) on heavy volume of 72,951,200 shares trading hands.
Microsoftis CEO, Steve Ballmer, said that growth in the Latin America is excellent. Too bad for Latin America. MSFT closed at 61.48, up 0.69 (+1.14%), on volume of 42,516,200 shares trading hands.
For full quotes on all the companies mentioned in this article, we have assembled this set of quotes at Yahoo! for your reference. For other stories regarding Appleis stock activity, visit our updated Apple Stock Watch Special Report. You can also check out our Apple Financial Boards, a new moderated forum for Apple Investors and people who are interested in Appleis financial dealings.