Sector: Technology
EQUAL
Investment Management Division
January 27, 2010
Sector Head:
Jason Kim
jkim120@bu.edu
Senior Analysts:
Eric Carrera
Ben Sommer
ercarrera592@bu.edu
bsommer@bu.edu
INVESTMENT SUMMARY & OUTLOOK
Technology started strong last week on strong earnings from Intel and Google.
However investors were disappointed this week with earnings report from Apple
and IBM, despite reporting a strong 3Q. This was a disappointing end as the
Nasdaq rose 15% during the last 6 weeks. Notably, IBM reported that service
contracts fell 7% in the 3rd quarter, hinting that companies are still wary of
spending on infrastructure. However shares for EBay and Yahoo! rose as they
reported better than expected 3Q income.
HEADLINES
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Apple’s 4Q Earnings Beat Expectations ……….. Reported profits totaled
$4.31 billion compared to $2.53 billion the previous year. Sales of iPhone 4
exceeded expectations, totaling 14.1 million sold. However, analysts were
disappointed in iPad sales, totaling 4.2 million. This came after Verizon and
AT&T announced sales of iPad in their retail locations starting at the end of
October.
IBM 3Q Earnings Beat Expectations ……….. IBM reported revenue of
$24.3 billion compared to $24.1 billion the previous year. It exceeded
analysts’ expected earnings of $2.75, by reporting $2.82 for 3Q. However
shares fell 4% based on disappointing revenue from its core service business.
It grew only 1% to $9.5 billion, hinting that companies are still reluctant to
spend and outsource its IT services.
Yahoo Shares Rises on Improved Income……….. Yahoo reported profits
of $396 million for 3Q, nearly double the previous year. Shares rose to
$15.80 on Wednesday. However, analysts note that sale of HotJobs mostly
contributed to the gain, as revenue remained nearly flat at $1.6 billion (less
than 2%).
EBay Forecasting Improved Sales for 4Q ……….. Raised forecast to
$2.39-2.49 billion for 4Q with earnings of 44 cents. This comes after
reporting 3Q revenue of $2.25 billion beating estimates of $2.18 billion.
Improved forecast comes on expected increased in usage of PayPal as more
consumers conduct their shopping online.
EA Acquires Mobile Publisher Chillingo ……….. EA purchased
developer Chillingo for nearly $20 million, makers of “Angry Birds.”
However it didn’t acquire rights to the brand name/game. This coincides with
mobile gaming as the fastest growing video game segments in the industry.
Games for smartphones is expected to rise 19% ($5.6 billion) this year, and
forecast to grow $11.4 billion in 2014.
STOCKS ON THE MOVE
SECTOR: _________
Investment Management
January 26, 2010
 Quantum Corporation +18.7% $2.93
Quantum have been rising as
there has been high volume in its stocks. Many analysts peg it as another
take-over target in the aftermath of 3Par.
 VeriFone Systems, Inc. +3.7% $30.36
Stocks rose on Wednesday due
to the company announcing a strategic partnership with Gemalto NV on a
new chip card payment solution.
S&P 500 VS. TECHNOLOGY COMPUTERS (6 MO)
ADDITIONAL COMMENTS & READINGS
We should focus on Yahoo! for the next few weeks, as rumors of merger with
AOL are still in the air. With disappointing 3Q earnings, this will escalate into
talks of even “partnership.”
SOURCES
http://www.businessweek.com/ap/financialnews/D9IUV1IG1.htm
http://www.forbes.com/2010/10/19/apple-beats-earnings-estimates-but-ipadsales-disappoint-marketnewsvideo.html
http://www.bloomberg.com/news/2010-10-19/ibm-shares-drop-after-servicecontracts-decline-for-third-straight-quarter.html?cmpid=yhoo
http://finance.yahoo.com/news/Yahoo-shares-up-after-3Q-apf1654826498.html?x=0&.v=1
http://www.businessweek.com/news/2010-10-20/ebay-forecasts-revenue-profithigher-than-estimates.html
http://www.reuters.com/article/idUSTRE69J4G020101020
SECTOR: _________
Investment Management
January 26, 2010
http://www.reuters.com/finance/stocks/keyDevelopments?rpc=66&symbol=PAY
&timestamp=20101020203000