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. Last Updated: 07/27/2016

IBM, Yahoo Sales Beat Forecasts

LOS ANGELES -- IBM and Yahoo posted profit and sales that beat analysts' estimates, spurring optimism that other U.S. technology companies reporting this month will follow suit.

Shares of IBM, the world's largest provider of computer services, and Yahoo, owner of the No. 2 U.S. Internet search engine, rose in European trading Wednesday following Tuesday's results. IBM said demand for computer services and software helped drive a 12 percent rise in net income. Sales of online advertising helped Yahoo produce a fivefold profit climb.

"They are a powerful, positive statement on the state of tech" and spending on information technology, or IT, said Rob Enderle, an analyst at the Enderle Group in San Jose, California. "IBM is showcasing the fact that IT dollars are coming back."

Gains at IBM, the second-largest technology stock in the world behind Microsoft and Yahoo indicate that companies remain willing to spend on technology-related products, services and advertising. Intel last week said sales this quarter may exceed analysts' estimates.

The three are among the first to report earnings for the final quarter of 2004. Microsoft reports next week.

Shares of IBM rose as much as $1.10 to $96 in Germany from a close of $94.90 in New York Stock Exchange composite trading Tuesday. They traded at $95.08 as of 10:18 a.m. Frankfurt time. Yahoo shares rose 78 cents from Tuesday's close to $37.96.

Technology spending boosted the Nasdaq Composite Index 8.6 percent last year and investors are looking for signs that will continue in 2005. The index is down 3.2 percent this year and, at 2106.04, is 58 percent below its March 2000 peak of 5048.62.

"I'm optimistic," said Rudy Grimm, who helps manage $4 billion for Berkeley Capital Management in San Francisco. He owns semiconductor stocks such as Analog Devices and Maxim Integrated Products.

"Capital spending looks pretty good, and technology companies are the primary beneficiary of that."

Armonk, New York-based IBM late Tuesday said net income rose to $3.04 billion, or $1.81 per share, from $2.71 billion, or $1.56, a year earlier. That beat the average estimate of $1.76 per share by 20 analysts polled by Thomson Financial.

Yahoo, based in Sunnyvale, California, said net income rose to $372.5 million, or 25 cents per share, from $75 million, or 5 cents, a year earlier. Profit excluding gains from a sale of Google shares was 13 cents, beating analysts' estimates of 11 cents.

"The numbers were reasonable, so the market should look favorably on this," said Jim Grossman, who owns IBM shares among the $62 billion under management at Thrivent Financial in Appleton, Wisconsin.

Microsoft, the No. 1 software maker, reports its fiscal second-quarter results Jan. 27. Microsoft is expected to report profit of 33 cents per share, the average estimate of 26 analysts in a Thomson Financial survey, on sales of $10.6 billion.

Intel, the largest maker of chips that power computers, said its sales exceeded $9 billion for the first time in the fourth quarter and forecast first-quarter sales that topped analysts' estimates.

"It's going to be a choppy earnings season for the technology stocks," said James O'Mealia, the president of Sunnymeath Asset Management, based in Sea Bright, New Jersey. He has about $25 million under management.

Motorola, the second-largest cellphone maker, reported fourth-quarter earnings that beat estimates.

The Schaumburg, Illinois-based company also said sales and profit this quarter may fall short of expectations. Motorola shares fell by as much as 53 cents, or 3 percent, to $16.90 in Germany on Wednesday.

IBM's results might be a sign of better-than-expected earnings from companies such as Symantec Corp., which was expected to report on Wednesday, said Chuck Jones, who helps manage $15 billion at Stein Roe Investment Counsel in San Francisco.

"It will be the smaller companies that people will be looking for better or higher growth rates that will tend to move the market," Jones said.