Tech results show resilience, future more gloomy

Microsoft Corp and a diverse group of technology companies met or beat Wall Street earnings targets, but uncertain outlooks undermined a short burst of enthusiasm from investors.
Microsoft itself initially gave investors some relief by dropping its forecast less than feared, but an after-hours rally in its shares fizzled.

"Even where earnings outperform expectations, there is still not a lot of good guidance going forward," said Diane Swonk, chief economist for Mesirow Financial. "It's very hard to give guidance, even if you have done well. It's very hard to know where the world is going."
Shares of Microsoft, whose products range from the Windows operating system to the Xbox video game system, were flat in extended trade after closing at $22.32.

"The company continues to set reasonable expectations and meet or beat them as they did here," said David Katz, chief investment officer of Matrix Asset Advisors. "The expectation was that they would bring down guidance, they only did that in a modest way. They seem to have a grasp on all their business."

Technology firms over the past few weeks have repeatedly complained of poor visibility into the December quarter and beyond, and worries about the global economy have prompted many to issue cautious forecasts.

Ingram Micro Inc, the world's biggest computer hardware distributor, elected to end its practice of issuing guidance altogether, citing the "unpredictability" of global markets. It reported quarterly sales declines in Europe and Asia, indicating that economic pain is spreading across the globe.

That report, combined with the forecast from Microsoft, are signs that technology spending will not hold up next year, said Fred Hickey, editor of the High-Tech Strategist Newsletter, a publication widely read by investors.

"The weakness has spread everywhere. All the regions are affected," he said. "They did not give much hope going forward. It's going to be a rough year."

Ingram shares were flat in extended trading after closing at $12.18. They've dropped 28 percent over the past month.

Flextronics International Ltd , the world's biggest contract manufacturer, reported adjusted results that met analysts' forecasts. Its shares added 4 percent after closing at $3.74, though they've lost half their value over the past month.

Hilliard Lyons analyst Thomas Carpenter said Flextronics' results were likely better than people were looking for, but said the future did not look promising. "There was a little bit of slowing in the quarter, mostly toward the end, and things are slowing further in this quarter. I think this is going to be a multi-quarter slowdown as we unwind the credit crunch."

More signs of slowing came from Juniper Networks Inc, which reported higher earnings and revenue but issued a cautious outlook, sending its shares down 5 percent from its close of $17.83. "A disaster scenario is already priced into the stock market. The uncertainty is where the fly in the ointment is," Swonk said.

Western Digital Corp, the world's second-largest maker of hard disk drives, said its net profit more than tripled, while revenue edged past analysts' average forecast. The company's shares were unchanged in after-hours trading after closing at $13.05.