Even though PC giants Hewlett-Packard and Dell reported significant year-over-year sales declines, tech stocks, buoyed by signs of confidence from other IT vendors, started to rise again Friday after slumping for most of the week.
Vendors in diverse sectors of IT such as Aruba Networks and chip maker Marvell Technology reported solid results this week and a survey of tech CFOs revealed confidence in sales trends for the rest of the year. Perhaps more importantly, behind the headline numbers, both HP and Dell -- respectively the number one and number three vendors in the beleaguered PC market -- did better than expectations.
All major U.S. indexes closed up Friday, with the tech-heavy Nasdaq at 3,160.18, up by 28.69 points. The Nasdaq computer stock index closed up by 16.75 to 1,569.25. On the Nasdaq, IT bellwethers including Dell, Microsoft, Intel, Google and Oracle closed up for the day. On the New York stock Exchange, IBM and HP closed up.
Stocks, including tech company shares, slipped midweek after meeting minutes from the Federal Reserve Board were released to the public. The notes indicated that some Fed members were having second thoughts about the central bank's policy of continuing to buy bonds to boost the stock market until signs of economic recovery are stronger. The fear is that the strategy will lead to inflation.
But HP shares led markets up again Friday, after it reported that for the quarter ending Jan. 31, profit declined year-over-year by 16 percent to US$1.2 billion and sales fell 6 percent to $28.4 billion.
The PC and related businesses were hard hit, as sales of PCs and workstations fell 8 percent to $8.2 billion and the company's printer arm suffered a 5 percent revenue drop to $5.9 billion. Analysts do not expect the PC market overall to do well this year, and HP suffers from a lack of products for the hot smartphone and tablet markets.
But the company did better than expected. Excluding one-time charges, earnings per share were $0.82, better than the $0.71 financial analysts had been expecting, according to Thomson Reuters. HP stressed that cash flow from operations of $2.6 billion was up 115 percent from the prior year and that it paid down debt by $1 billion.
"Our primary focus is to deliver on the full year outlook, and I feel good about the rest of the year. We'll be bringing a number of new programs and disruptive innovations to market in the coming quarter, and we expect the benefits from our restructuring will accelerate through fiscal 2013," CEO Meg Whitman said in a statement. On the company's earnings conference call, she said that HP would not spin off its PC arm, as it had started planning to do in 2011.
HP shares rose $2.11 to $19.21 in late afternoon trading Friday.
