By Rex Crum, MarketWatch
SAN FRANCISCO (MarketWatch) -- The broad tech sector was putting
in a mixed performance Wednesday, but it was losses by IBM Corp.
and Advanced Micro Devices Inc. that garnered much of investors'
attention on disappointing reaction to their business
forecasts.
IBM (IBM) fell by 3.3%, to $182.16 after the tech giant on
Tuesday reported a fourth-quarter profit that improved from a year
ago, but recorded sales that failed to meet Wall Street analysts'
forecasts. IBM said that for its fourth quarter, it earned $6.2
billion, or $5.73 a share, on $27.7 billion in revenue. During the
same period in 2012, IBM earned $5.83 billion, or $5.13 a share, on
revenue of $29.3 billion. IBM also reported an operating profit of
$6.13 a share. Analysts surveyed by FactSet had forecast IBM to
earn $5.99 a share on $28.27 billion in sales.
Much of IBM's disappointing sales were attributed to weakness in
its hardware business, which recorded a 26% drop in revenue, to
$4.3 billion.
Still, IBM said it expects its earnings for all of 2014 to be at
least $17 a share, or at least $18 a share on an operating basis.
Analysts had earlier forecast IBM to earn $18.02 a share for the
year.
IBM doesn't directly provide quarterly earnings and revenue
forecasts. But on a conference call to discuss IBM's results, Ben
Reitzes, of Barclays, said that based on comments from IBM, the
company appeared to be headed toward a first-quarter profit of
$2.50 a share. That figure would miss the consensus estimate for
earnings of $3.27 a share.
While not confirming Reitzes' estimates, IBM's Chief Financial
Officer, Martin Schroeter said, "We think your math is where we
would put it, and then on a year-to-year base we feel like we have
a pretty good game plan for 2014."
However, Reitzes said Wednesday that due to factors such as the
decline in hardware sales, IBM has its work cut out to meet it its
forecasts.
"With the end of the mainframe cycle and weakness in emerging
markets, coupled with pressure from cloud [services], revenue
should remain pressured," Reitzes said. "We believe that the
outlooks for 2014 and 2015 are difficult to achieve without the
help of taxes and gains, since growth seems elusive."
But IBM wasn't having as bad a day as AMD (AMD).
The semiconductor company's shares fell almost 11%, to $3.71
after it said Tuesday that it expects its first-quarter revenue to
fall 16%, "plus or minus 3%" from the $1.59 billion it reported in
its 2013 fourth quarter. The weak outlook also dimmed any
enthusiasm that AMD might have expected from swinging to a
fourth-quarter profit of 12 cents a share, from a loss of 63 cents
a share in the year-ago period.
Among other leading tech stocks, Netflix Inc. (NFLX) was up by
$1.48 a share at $329.96, and eBay Inc. (EBAY) slipped by 4 cents a
share, to $54.12. Both companies are slated to report quarterly
results after the close of trading Wednesday.
The tech-heavy Nasdaq Composite Index (RIXF) rose 5 points to
4,231. The Philadelphia Semiconductor Index (SOX) edged into
positive territory.
More tech-sector news from MarketWatch:
New U.S. subscribers key to Netflix's results
Icahn: Apple doing 'disservice' to investors
Yahoo's Mayer: 2014 is the tipping point for the Internet
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