The tech earnings parade continues through today, now that we have Intel and Yahoo in the books. Strange day for tech, Tuesday was. So much optimism about Intel and yet the company disappoints, at least at first glance, with softer margins than expected. But here's another way to look at Intel's numbers which may actually bode well for broader tech the rest of this year.
Intel says margins hit 46.9% when the Street, and the company itself, had projected something closer to 48%. But even with the margin shortfall, the company was still able to post a 44% jump in profits. That's a pretty neat trick. At the same time, CFO Andy Bryant told me during my one-on-one interview with him (see video clips below) just after the earnings were released, that he still anticipates a strong second half of the year--reiterating what he had mentioned to me following the company's first quarter numbers.
This is significant. Intel reported 46.9% margins in Q2, but Bryant tells me that figure should swell to 52% in Q3, and average out to 51% for the full year. A tech sell-off following Intel's report, based on Q2 margins alone may have been premature and could provide an opportunity.
At Yahoo, shares popped on the initial news that the company met expectations. But guidance is so soft, and shows so clearly the depth of its financial issues, that we're seeing reality kick in and shares begin a retreat. The company's report is the best evidence yet why Terry Semel was shown the door, and why co-founder Jerry Yang is now running the show. Trouble is, the company was short on turnaround details once again, leaving investors floundering about what to do next. Hence today's share-price pullback.
Now, we set our sights on eBay and IBM. There's a fair amount of optimism surrounding both. For eBay, analysts expect 32 cents a share on $1.78 billion. But there will be a lot of focus on the company's business here in the U.S. and Germany and what measures are being taken to juice business in both markets. We'll also be listening for any new developments in the company's ongoing spat with partner Google .
You remember the big blow-up between the two at the eBay Live! event in Boston when Google decided to hold a competing event to try to attract eBay sellers to its "CheckOut" payment service. eBay withdrew from its advertising relationship with Google for 10 days; what eBay called an "experiment." EBay contacted me afterward to tell me that the company discovered it wasn't nearly as dependent on Google as it thought it was. That's a "bold statement" says Citigroup's Mark Mahaney. Look for this to come up on the company's call this afternoon.
For IBM, shares continue to knock up against a 52-week high, up 12% this past quarter. Lots of focus on the company's services and software units. The Street looking for nice bumps in both. Remember it was April when the company announced an aggressive, $15 billion share buyback program. If IBM is optimistic through the second half of the year, and you marry those comments with Intel's outlook, we may see a nice turnaround in tech tomorrow.
Watch for our complete coverage right at the close. It should be a busy evening.
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