October 15, 2009 / 11:04 PM / in 8 years

Google, IBM round out strong tech results week

SAN FRANCISCO (Reuters) - Google Inc and IBM rounded out a strong week of technology results, outstripping already high expectations and providing further evidence that a recovery is brewing.

<p>An employee answers phone calls at the switchboard of the Google office in Zurich, August 18, 2009. REUTERS/Christian Hartmann</p>

Hot on the heels of bellwether chipmaker Intel Corp’s robust report on Tuesday, the results from the Internet search leader and the technology services giant showed demand from both consumers and businesses is returning.

“Corporate spending is very much starting to show some rebound,” said Keith Wirtz, president and chief investment officer at Fifth Third Asset Management. “Outside the U.S., I think you would see technology spending is stabilizing in Europe as well.”

Intel’s results added more fuel to a tech sector rally that began earlier this year, when signs emerged that the worst of the recession could be over.

Actual revenue growth is only being seen in a handful of tech companies -- Google is one -- but the top-line results from IBM, Google, Intel and Advanced Micro Devices all bested Wall Street estimates. For a graphic tracking these companies' results, click: here

While bottom-line results have been bolstered by mass cost-cutting, investors have been looking for signs of life on the revenue front.

“We’ve been complaining about tech companies that beat their estimates based on cost-cutting, but haven’t really been able to beat their topline number,” said Ted Parrish, co-portfolio manager at Henssler Equity Fund. “It’s good to see one (IBM) that’s finally done that.”

Although IBM’s shares fell as investors, expecting the company to raise its long-term guidance even further, locked in profits, IBM sounded an optimistic note as it forecast a return to revenue growth in the fourth-quarter.

For its part, Google posted its strongest sequential revenue growth in more than a year as advertising spending began to bounce back. It handily topped analysts’ estimates on and shares rose 3 percent.

“I think a rising tide will lift all boats,” said JMP Securities analyst Sameet Sinha. “Definitely, we hear from advertisers that they are starting to invest in the fourth quarter. E-commerce is doing really well and that is encouraging advertisers to spend online.”

APPLE, MICROSOFT NEXT

Next week will provide a further snapshot of technology demand, as it brings quarterly reports from both Apple Inc and Microsoft Corp.

The overall tech sector has been on a roll this year following a brutal slide in demand at the end of 2008 as the financial crisis spread.

But some feared that expectations were simply too high for third-quarter earnings, and that good, but not stellar results would prompt a sell-off and snuff out a rally that has sent tech issues up around 60 percent this year.

Intel helped quash some of those fears when it led off the week on Tuesday by blowing past Wall Street estimates. On Wednesday, IDC said global PC shipments rose a better-than-expected 2.3 percent in the third quarter.

On Thursday, AMD also posted results ahead of Wall Street estimates, although its shares fell 5 percent on profit-taking in gains that followed Intel’s report.

Of course, not everything is rosy in the technology world. Earlier Thursday, mobile phone giant Nokia Oyj surprised investors when reported it reported its worst ever result as it booked a big write-down at its networks unit.

In addition, chipmakers Cypress Semiconductor Inc and Fairchild Semiconductor International Inc posted strong quarterly results, but the numbers failed to impress investors.

Reporting by Gabriel Madway, editing by Tiffany Wu

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