Tech Check

Yahoo and Intel Surprise; IBM Keeps on Comin'!


The news from tech seems pretty good at first blush, and it's coming from some surprising places. Most notably, the news from Yahoo and the shares are reacting nicely. More than nicely. Yahoo shares scampered 10% as this news trickled out, and I have to say, I'm surprised. Seems like a lot of investors are surprised too since shares are climbing so big so fast.

Yahoobeat the Street by 3 cents a shareon better-than-expected revenue of $1.28 billion.  The Street was looking for $1.24 billion. President Sue Decker on the conference call sees display advertising growth accelerating, and that may account for the increase in revenue guidance in the fourth quarter, now at $1.3 billion to $1.45 billion instead of the $1.37 billion analysts were looking for.

I was talking to Piper Jaffray's Gene Munster when the news came out, and he and I couldn't remember the last time Yahoo beat the Street. On anything. But like he said, one quarter with a performance like this might be a relief, but it's hardly a trend. Still, it seems like investors are staging a pretty strong relief rally.

To Intel now, and talk about a blockbuster quarter. The world's largest chipmaker absolutely crushed the quarter: Yes, the company beat EPS by only a penny at 31 cents, but revenue came in a half-billion dollars better than the company's own mid-quarter guidance from just a few weeks ago! Andy Bryant, the company's chief financial officer, and soon to be chief administrative officer (yes, this is the last quarter where he'll preside over Intel's finances) tells me in my interview with him right after the numbers were released, the quarter kept growing, and then kept growing way beyond the company's estimates.

The 52.4% gross operating margins also built nicely on the 46.9% the company reported a quarter earlier. But the real good news comes from Intel's fourth-quarter guidance, with the company offering a new revenue range of $10.5 billion to $11.1 billion, way ahead of the $10.43 billion the Street was anticipating. Bryant tells me Intel is tracking unusually strong PC growth globally, particularly in Europe, and thanks to cost-efficiencies, the company should realize gross margins in the fourth quarter of 57%, give or take.

That number took the Street by surprise, particularly Jefferies' John Lau, who says this might be the first indication yet that Intel could return to those lofty 60% margins the company used to enjoy. How long can these good times roll? Bryant tells me that though everything seems to be working, he's loathe to predict 2008. But the trends look strong, and they appear not to be vanishing any time soon.

For IBM ? What seemed to be a solid, if mixed bag report. The company beat the Street, but on my first look, services bookings seemed a little soft; same goes for hardware and software sales. But for a company this big, operating in so many markets, and enjoying a nice run these past few months, it came close enough for investors to take a deep breath and seem comfortable with their positions in the company. 

Tech should guide the Street, in a good way, on Wednesday, with eBay's earnings due next.

FYI: Here's my interview with Intel CFO Andy Bryant.

Bryant on Intel Earnings

Questions?  Comments?