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79,773 News Articles

IT investors back Apple, AMD & HP

Computer sector up in a down market

Concerns about retail sales and the US trade deficit Thursday put a halt to the recent increase in market indexes, including the technology-oriented Nasdaq, but news from bellwether IT vendors such as Apple, AMD and HP show that underlying computer sector issues are still uppermost in the minds of IT investors.

Announcements about slower sales from major retailers and reports of a widening US trade deficit were blamed for a 1.7 percent dip in the Nasdaq Composite Index on Thursday, a day after reaching a six-year closing high.

But not all computer companies were affected. Shares of Apple reached another record high on Thursday, closing at $107.34, up by $0.46. Company officials including CEO Steve Jobs faced tough questions during a shareholder meeting yesterday, during which the issue of stock options backdating was brought up several times. Apple, which took an $84 million charge after reporting last December that it had backdated options, has said Jobs knew about the backdating but did not profit from it and did not understand the accounting issues.

The heat on Jobs was turned up last month when one of the two former Apple officials charged by the Securities and Exchange Commission in the case alleged that he had discussed the accounting issues with Jobs. But the Apple board has consistently stated its confidence in Jobs, and shareholders yesterday voted down a proposal that would have changed how Apple prices stock option grants for senior executives.

Strong sales and creative product strategy - with Apple extending its reach into mobile phones with the imminent release of the iPhone - appear to outweigh any lingering concerns about accounting issues. Two weeks ago, Apple reported that sales of both Macs and iPods boosted profit by 87 percent from a year ago, to $770m. Until sales stumble, or the company makes a misstep in product strategy, users and investors will most likely continue to have tremendous goodwill for the company.

AMD also bucked the downward trend in the market, jumping $0.48 on Thursday to close at $14.05. AMD is under tremendous pressure as Intel has managed to battle back on the technology front, with new multicore chips. The jury is still out on whether AMD's forthcoming Barcelona quad-core chip will be enough to lift the company's sinking fortunes. But news that AMD will cut 430 jobs was seen as a good omen that the company is making serious efforts to reign in operating expenses.

HP earlier this week raised expectations for the second quarter, in advance of its financial results announcement next week. Reporting that it sent some details of its report out to a third party by mistake, HP went ahead on Tuesday and disclosed some of the information publicly. The company said that for the quarter ending 30 April, revenue will be between $25.5bn and $25.55bn.

The company had previously said revenue would be about $24.5bn. The better-than-expected sales are due to strong uptake of both PC and server products. This is especially good news in the tight PC market, where a price war is hurting vendors globally.

Analysts applauded the news, but it wasn't enough to give HP a lift in a down market. Company shares closed on Thursday at $44.67, down by $0.26.


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