Here We Go Again: Stocks Slide, Recover

Reflecting the turmoil in the technology world, a series of strong earnings reports Wednesday from blue-chip tech companies met with mixed reactions from investors--in some cases unleashing a torrent of additional selling.

Bellwether companies such as America Online Inc., Microsoft Corp. and Sun Microsystems Inc. all managed to beat analysts’ expectations, but the good news was tempered by lingering concerns about future sales and profit growth in the technology sector. In addition, several other blue-chip compa nies, including Apple Computer and Texas Instruments Inc., disappointed investors.

“Normally you would think, ‘These are great quarters; the stocks should trade up,’ ” said Bob Turner, chief investment officer for Turner Investment Partners in Berwyn, Pa. “But it has been the type of market where if there’s any questionable element to the earnings, they put the stock under pressure.”

Sun, for example, made significant gains against rivals Hewlett-Packard Co. and IBM Corp., but the firm also said higher memory prices squeezed its gross margins and that growth would slow in the second half of its fiscal year.

Sun finished the day down $1.06, to $110.31, despite reporting a 60% increase in sales and an 85% increase in profit. The company’s earnings of 30 cents a share easily topped analysts’ forecasts of 26 cents a share.

More than a dozen tech companies reported strong earnings on the Super Wednesday of tech firm results, but investors didn’t always reward the numbers. Data-storage maker EMC Corp., for example, reported a 55% profit gain, but its stock fell $4.94, or 5%, to close at $90 in New York Stock Exchange trading.

Southern California’s two big chip makers, Broadcom Corp. and Conexant Inc., reported strong results, but Conexant warned of weaker sales ahead.

Internet giant America Online posted operating earnings of $350 million or 14 cents a share, topping analysts’ estimates of 13 cents. The results compared to $182 million, or 7 cents a share a year ago.

Revenue rose 34% to $2.0 billion. The firm said it added 1.4 million net new subscribers in the quarter, for a total of 24.6 million worldwide. AOL’s closely watched advertising and e-commerce revenue--which accounted for a third of total revenue--rose 80% to $649 million, within analysts’ estimates.

AOL stock got a boost, up $3.31 to $46.91. But that recouped only part of Tuesday’s plunge of $9.06.

Microsoft, the Redmond, Wash., software behemoth, said its profit before accounting changes increased 18% to $2.58 billion or 46 cents a share in the quarter, topping analysts’ estimates of 41 cents.

But operating earnings--before gains achieved by the company’s investment portfolio--were slightly below year-ago results.

However, analysts were impressed by the company’s gain in sales, up 7.7% to $5.8 billion. And Microsoft said sales in the current quarter should post a percentage gain in the low-teens.

The stock rose $1.31 to $51.75 in regular trading, before results were announced, then rose to nearly $55 in after-hours trading.

“There are companies that are going to do well, and people just need to be selective and figure out who they are,” said Jack Gold, a vice president with Meta Group, a technology market research firm in Westborough, Mass.

“Because some of these folks are announcing reasonable earnings, people are going to assume that perhaps the sky isn’t completely falling,” Gold said. “But to get back to some level of optimism--not the euphoria of two years ago, but optimism--is going to take a number of other major companies saying, ‘We do have good earnings.’ ”

Broadcom’s aggressive acquisition strategy and its stock-option costs led the Irvine-based firm to report a third-quarter loss of $19.4 million, or 9 cents a share. But excluding those items, profit was $78.7 million, or 30 cents a share. In last year’s third quarter the industry’s top chip maker for cable modems earned $24.6 million, or 10 cents a share.

Broadcom’s acquisitions--10 this year alone--ignited sales: Third-quarter revenue more than doubled to $319.2 million from $136.6 million.

The stock tumbled $14.88 to $209.38 in regular trading, but rose as high as $219 in after-hours trading following the earnings report.

Conexant, meanwhile, met analysts’ expectations by reporting fiscal fourth-quarter earnings, excluding charges, of $43.5 million, or 18 cents a share. A consensus of analysts anticipated earnings of 18 cents a share.

The Newport Beach communications chip maker said that including the charges, it lost $57.1 million, or 25 cents a share. In last year’s fourth quarter, Conexant earned $39.4 million, or 18 cents a share. Revenue rose to a record $561.4 million from $243.7 million.

But the company warned that fourth-quarter sales could fall as much as 7% from third-quarter levels because of weaker PC and cellular phone sales.

Conexant stock dropped $7.31 to close at $26.31 in regular trading, then fell to $22 in after-hours trading.

Details from other tech earnings reports Wednesday:

* Akamai Technologies Inc., which sells a service that speeds the delivery of data over the Internet, said its third-quarter loss widened as it spent more on marketing and administration. The Cambridge, Mass., company said its loss widened to $304.1 million, or $3.27 a share, from $243.2 million, or $2.78, in the second quarter. The company didn’t release comparable figures for the year-earlier quarter. Sales rose 50%, to $27.2 million.

* Apple Computer, stung by a slowdown in PC sales and a declining share in the education market, posted a 3% drop in fourth-quarter profit and missed Wall Street’s lowered forecasts. The Cupertino, Calif.-based company earned $170 million. Excluding one-time investment gains, the net profit was $108 million, or 30 cents a share, down from $111 million, or 31 cents per share a year earlier.

Revenue rose 40% to $1.87 billion. But Apple said the need to reduce inventories will mean only a “slight profit” in the current quarter. Apple shares, unchanged at $20.13 in regular trading, plunged to $16.50 in after-hours trading.

* Ariba Inc., a Mountain View, Calif., maker of software to help companies buy and sell goods over the Internet, said its fiscal fourth-quarter loss widened as expenses surged and sales rose more than eightfold. The loss grew to $339.3 million, or $1.50 a share, from $9.88 million, or 7 cents, a year ago. Excluding amortization, Ariba lost $1.06 million, or break-even a share. Sales rose to $134.9 million from $17.1 million.

* BroadVision Inc., a Redwood City, Calif., maker of software for e-business, said third-quarter earnings came in one penny better than analysts’ expectations. The company said net income, excluding charges, totaled $13.6 million, or 5 cents per diluted share, compared with net income of $4.5 million, or 2 cents per diluted share in the year-ago period. Revenue rose to $120.2 million from $29.8 million.

* Cirrus Logic Inc., an Austin, Texas, semiconductor equipment maker, reported a fiscal second-quarter profit that topped Wall Street expectations and reversed a loss from a year earlier. Excluding extraordinary items, Cirrus said it earned $16.1 million, or 23 cents per share, compared with a loss of $735,000, or 1 cent per share, a year earlier. Cirrus said a surge in core operations would push earnings for the rest of the year beyond current expectations.

* EMC Corp., the No. 1 maker of data-storage systems for big companies, said third-quarter profit rose 55% as customers bought more machines and software to keep information secure and accessible. The Hopkinton, Mass., company said net income rose to $458.2 million, or 20 cents a share, from $295.8 million, or a split-adjusted 13 cents, a year earlier. Revenue rose 34% to $2.28 billion.

* Extreme Networks Inc., a Santa Clara, Calif., maker of computer-network switches, said fiscal first-quarter profit rose $4.53 million, or 4 cents a share, from $4.05 million, or 4 cents a year earlier. Sales more than doubled. Net income rose 12%. Revenue in the period ended Sept. 30 climbed to $119.3 million from $47.2 million and was up 29% from $92.4 million in the fiscal fourth quarter.

* Macromedia Inc., a San Francisco maker of software used to design Web pages, said it had a fiscal second-quarter profit as sales soared 73%. Net income was $10.3 million, or 18 cents a share, compared with a loss of $792,000, or 2 cents, in the year-ago period. Sales rose to $102.4 million from $59.3 million.

* Next Level Communications Inc., a Rohnert Park, Calif., maker of equipment used to deliver video programming and high-speed Net service over phone lines, said its third-quarter loss narrowed as sales more than tripled. The loss narrowed to $13.4 million, or 16 cents a share, from $20.8 million, or 27 cents, a year ago. Sales increased to $48.3 million from $14.2 million.

* QLogic Corp., an Aliso Viejo, Calif., semiconductor maker, posted net income of $22.7 million, or 24 cents a share, excluding acquisition costs, for its fiscal second quarter, ended Oct. 1. For last year’s second quarter, it earned $12.3 million, or 14 cents a share. Including the $22.9-million charge in this year’s quarterly results, the company lost $1.3 million, or 1 cent a share. Its quarterly revenue rose to a record $87.6 million, up 71%.

* Rambus Inc., a Mountain View, Calif., computer-memory designer, said its fiscal fourth-quarter profit rose nearly fourfold as royalties surged from semiconductor companies that license its designs. Net income rose to $10.2 million, or 9 cents a share, from $2.63 million, or a split-adjusted 3 cents, a year earlier. Revenue more than doubled, to $26.9 million, from $12.3 million.

* Symantec Corp., maker of the popular Norton computer security products, reported fiscal second-quarter operating earnings that beat Wall Street’s expectations as consumer demand for its anti-virus and other products rose. The Cupertino, Calif.-based company said earnings before one-time charges rose 47%, to $45.8 million, or 72 cents per share, compared with $31 million, or 52 cents in the year-ago period. The figure for both years included neither charges related to acquisitions, divestitures nor other one-time charges. Revenue, accounting for a divestiture in 1999, rose 14%, to $192.3 million from $169.2 million.

* Texas Instruments Inc., whose chips power two-thirds of the world’s cellular phones, said third-quarter earnings surged 69% because of demand for wireless devices and high-speed Internet access. Dallas-based TI reported net income of $679 million, or 38 cents a share, compared with net income of $402 million, or a split-adjusted 23 cents, a year earlier. Sales rose 26% to $3.16 billion.

But TI forecast flat fourth-quarter sales due to weaker world demand for wireless phones. The company’s shares fell $3.31 to $36.88 in regular trading, and hit a new 52-week low.

* Webvan Group Inc., the Foster City, Calif., Internet grocer, had a third-quarter loss because of costs to deliver groceries and an expansion into new markets. Webvan, which owns HomeGrocer.com, lost $148 million, or 40 cents a share, on $54 million in sales. The company didn’t provide results for the third quarter of last year.

* Camarillo-based Vitesse Semiconductor Corp., whose chips speed data on fiber-optic networks, said its quarterly net income fell 40% on acquisition costs. Net income dropped to $11.6 million, or 6 cents a share, from $19.4 million, or 11 cents, a year earlier. Excluding acquisition costs, profit was $40.3 million, or 21 cents a share. Revenue rose 70% to $138 million.

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Bloomberg News, Reuters and Associated Press were used in compiling this report.