Stocks Soar, Led by Record 254-Point Nasdaq Gain
Major technology and telecom companies reported solid first-quarter earnings gains Tuesday, but some analysts were concerned about pockets of weakness in the reports.
America Online, Intel, IBM and Qualcomm were among the companies that beat consensus profit estimates from Wall Street analysts.
Partly in anticipation of the reports, those stocks have helped lead the market’s dramatic rebound during the last two days. As their earnings reports were released, mostly after regular trading on Tuesday, some of the stocks edged lower.
AOL, poised to become one of the world’s leading media companies with its acquisition of Time Warner, reported net income of $271 million, or 11 cents a share, up from $104 million, or 4 cents, in the year-ago period. Analysts had expected 9 cents a share, on average.
Despite the looming threat of rivals offering free Internet service, Chairman Steve Case said AOL is ahead of its expected pace in new subscribers this year, adding 1.7 million new members worldwide to close out the quarter with 22.2 million subscribers.
Including AOL’s sister CompuServe and Gateway.net services, America Online added 2 million new subscribers worldwide, ending the quarter with 25.8 million subscribers to its interactive services.
Subscriber growth contributed to a 33% increase in subscription revenue, which rose to $1.15 billion from $869 million in the same period last year. Total revenue for the quarter rose 47% to $1.8 billion.
AOL shares, up $2.06 to $60.50 in regular New York Stock Exchange trading, added 25 cents in after-hours activity.
At Intel, profit from operations rose to $2.13 billion, or 61 cents a share, from net income of $2 billion, or 57 cents, a year ago. Sales rose 13%, more than analysts expected, to $8.02 billion from $7.1 billion.
Intel is benefiting from strong demand for personal computers and from more efficient manufacturing that reduces the size of its chips.
The company has sold out of some versions of its Pentium III microprocessors, and said it expects supply to remain tight at least through the second quarter.
“We are scrambling to catch up,” Chief Financial Officer Andy Bryant said. “Demand is stronger than expected, and we think we’ll have a strong second half.”
Intel shares, up $6 to $129 in regular Nasdaq trading, eased to $126 after hours.
IBM said quarterly profit rose 3.3% to $1.51 billion, or 83 cents a share, from $1.47 billion, or a split-adjusted 78 cents. That topped an average Wall Street expectation of 78 cents, but analysts were concerned that IBM sales, which they had expected to increase, instead fell 4.8% to $19.35 billion from $20.32 billion.
Sales of hardware, which IBM had warned would be hurt by lingering Y2K worries, slumped 12% to $7.7 billion. And the company lost $178 million in the division that includes personal computers, a return to the worst level of performance by that segment last year.
IBM shares, up $3.38 to $115.13 in regular trading, slid to $111 after hours.
At a Glance
* San Diego-based Qualcomm also beat analysts’ expectations by reporting net income of $199.7 million, or 25 cents a share, for its fiscal second quarter ended March 26. Most Wall Street analysts expected the company to report earnings of 24 cents a share. The wireless technology company had posted a net loss of $42.6 million, or 7 cents a share, for the second quarter of 1999. Revenue in the latest quarter fell to $728 million, from $932 million a year earlier, reflecting the sale of two businesses and lower sales of Qualcomm’s specialty chips. Qualcomm stock, a top performer last year, fell $4.69 to close at $112.19 before the report, then rose to $119 after hours.
* Broadcom, the Irvine-based leading developer of high-speed communication chips, said first-quarter earnings rose more than expected as sales jumped 91%.The company posted net income of $41.8 million, or 17 cents a share, for the period ended March 31. That amount, which includes one-time acquisition charges, was a sharp jump from $15.7 million, or 7 cents a share, for the same period a year earlier. Broadcom’s stock, which had slumped as low as $122.25 recently, rose $8.44 a share to $157 in regular trading, but eased to $153 after hours.
* Sprint, which is being bought by rival MCI WorldCom, topped forecasts with a 14% gain in first-quarter operating profit by the company’s regular phone and data business and a smaller-than-expected loss by its fast-growing wireless operation. The company said its FON Group, which provides long-distance and other communications services through traditional wired connections, posted sales of $4.4 billion, up 7% from $4.1 billion in the first quarter of 1999. The FON unit earned $907 million, or 65 cents a share, in the first three months of the year, up 14% from $795 million or 55 cents a share during the same period in 1999. The Sprint PCS division, a wireless business that is traded as a separate “tracking” stock, lost $513 million, or 54 cents a share, compared with a loss of $626 million, or 71 cents a share, in the same quarter last year. In regular trading Tuesday, Sprint FON shares rose $1 to $57.75, while Sprint PCS shares rose $6.63 to $53.38.
* RealNetworks posted first-quarter earnings of $8.7 million, or 5 cents a share, compared with a loss of $526,000 a year earlier. The leading maker of software for playing audio and video over the Internet said revenue rose 120% to $53.5 million.
* EMC, maker of corporate computer storage systems, said first-quarter profit rose 49% to $332 million, or 30 cents a share, a penny above estimates, as revenue rose 23% to $1.82 billion. Results in both quarters are stated as if EMC owned Data General, which it bought for $1.22 billion in October.
* Inktomi marked its first profitable quarter with earnings of $1 million, or 1 cent a share, as revenue grew beyond forecasts. Analysts were expecting a loss of 2 cents from the maker of software to speed Web browsing and to search for information on the Internet. The company lost $7.4 million, or 7 cents, a year ago. Revenue climbed to $47.3 million from $15.2 million. Analysts expected revenue of $41.3 million, according to First Call/Thomson Financial.
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Times staff writer P.J. Huffstutter and wire services contributed to this report.
