Wall Street Beat: Investors shrug off mixed results

Sun fails to deliver on long-awaited financial turnaround

This week, at the tail end of earnings season, leading IT and media companies reported mixed results. Technology investors appear to be shrugging off the bad news and focusing on positive signs, however, as the tech-heavy Nasdaq Composite Index recovered from a decline in recent weeks.

Media and Internet bellwether Time Warner Inc.'s report Wednesday was one of the week's bright spots. The company said third quarter net income rose 80 percent from the year-earlier period, and ascribed the increase to gains in its America Online Inc. (AOL), cable, and networks units, among other divisions. Net income jumped to $897 million from $499 million a year earlier. But perhaps just as important for future-looking investors and users, the company backed earlier forecasts, saying that it still expects percentage growth in the "high single digits."

Time Warner (ticker symbol: TWX) shares gained $0.33 to close at $17.90 on the day of the announcement. The company's solid forecast offset cautious forecasts last week from companies such as Microsoft Corp. and Amazon.com Inc.

Reporting on Tuesday after the market closed, Sun Microsystems Inc. failed to deliver a long-awaited financial turnaround. The company reported an increase in revenue, mainly due to its acquisition of Storage Technology Corp. and SeeBeyond Technology Corp. But even that gain fell short of what analysts polled by Thomson First Call had expected. Sun's third-quarter revenue was US$2.7 billion, while analysts expected $2.89 billion.

Though Sun's acquisitions add storage and middleware strength to its product portfolio, and steps such as embracing Intel Corp. chips have heartened some users, the company's inability to boost fundamentals such as sales is worrying tech investors. Sun Microsystems (ticker symbol: SUNW) shares fell $0.12 Wednesday to close at $3.73.

Mainly due to acquisition charges, Symantec Corp. Tuesday reported a net loss for the third quarter of $251 million. Estimates for revenue for the current quarter and the entire fiscal year were both $0.01 below what analysts had been forecasting, leading some company-watchers to speculate that merger-execution problems with Veritas are taking a toll. On Wednesday company shares (ticker symbol: SYMC) dropped by $4.63 to close at $19.37

In one of the biggest disappointments of the week, Dell Inc. (ticker symbol: DELL) shares dropped by $2.64 to close at $29.24 Tuesday, a day after the world's leading PC maker reported that it would miss its fiscal third-quarter forecasts, citing weakness in the U.S. consumer market, inventory problems and slack sales in the U.K.

In a scandal unrelated to earnings, top executives at Mercury Interactive Corp. including Chief Executive Officer (CEO) Amnon Landan resigned Wednesday after an internal inquiry into stock-option grants revealed irregularities including the incorrect reporting of the date of at least 49 option grants. Company shares went into free fall, declining by $9.34 to close at $25.66 Wednesday. If a restatement of financial reports isn't completed by the end of the month, the company risks being delisted by Nasdaq. It is now trading under a modified ticker symbol, MERQE.

Macroeconomic news on third-quarter U.S. productivity, however, appeared to trump the mixed financial results and forecasts from IT companies this week. In additional to some upbeat reports on the retail sector, and some news about oil price declines earlier in the week, the U.S. Labor Department said Thursday that business productivity grew by 4.1 percent in the third quarter, the biggest quarterly increase in more than a year. The Nasdaq Composite Index (COMPX), widely seen as an indicator in tech-sector confidence, jumped by 15.91 point Thursday to close at 2160.22, almost 100 points above its close a week earlier.

REFERENCES:
Time Warner's Q3 net income jumps 80 percent, Nov. 2, 2005
Losses continue at Sun, Nov. 1, 2005
Symantec suffers on weak forecast, CFO exit, Nov. 2, 2005
Mercury CEO, CFO resign in wake of accounting probe, Nov. 2, 2005
What's wrong with Dell?, Nov. 1, 2005

Copyright © 2005 IDG Communications, Inc.

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