Technology sector jitters hit Apple and eBay
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Apple and eBay on Wednesday fell foul of Wall Street's latest bout of jitters over the prospects for the technology sector, with shares in both companies slipping in after-market trading even though both reported strong quarterly earnings.
The concerns follow disappointing earnings earlier in the week from Intel and Yahoo!, which put an end to a rally in tech stocks that had accompanied what is typically the industry's strongest quarter of the year.
While Apple had already pre-announced a big jump in revenues thanks to global demand for the iPod digital music player, eBay on Wednesday revealed a rebound in its own growth rate as ecommerce and payments on sites around the world rose strongly during the holidays.
However, Apple issued a forecast for the second quarter that failed to match Wall Street expectations. The company said it expected earnings of 38 cents a share in the quarter ending in March, on revenues of $4.3bn. Most analysts had been expecting earnings of 48 cents a share on revenues of $4.6bn.
EBay, meanwhile, left its financial forecasts for this year unchanged, disappointing some investors who had hoped it would issue a more optimistic outlook.
"We have a very bullish outlook," said Rajiv Dutta, chief financial officer at eBay, though he added: "There is the caveat related to the seasonality of the business." eBay was also hesitant to change its earlier guidance until it had a clearer view of the outlook for some of its recently acquired businesses, he added. These include Skype, the voice-over-internet company, and Shopping.com, a comparison shopping service.
Both companies reported record performance in their most recent quarters. Apple recorded net income of $565m in the final months of 2005, up almost two-fold from $295m one year ago. Revenues were $5.8bn, compared with $3.5bn in the year-ago period. Apple earned 65 cents a share, compared with 35 cents a share last year.
Apple shipped just over 14m iPods in the first quarter, a 207 per cent increase over the same period one year ago.
For eBay, the final three months of last year brought a reacceleration in revenue growth and produced earnings per share that were higher than both its own and Wall Street estimates. The internet auction company's revenue rebound came on the back of a recovery in its domestic US business, which saw net revenues jump by 40 per cent, to $526m. This represented the third quarter in a row that eBay had managed to boost he growth rate in the US, cementing a solid rebound from the 22 per cent growth rate seen in the first quarter of last year. The improvement was aided by acquisitions, with revenues from Shopping.com boosting the latest quarter.
International revenue growth, on the other hand, continued to slow, with net revenues up 35 per cent at $473m. That compares with a growth rate of 65 per cent in the same period a year before. Payment revenue growth also rose, with revenues up 48 per cent to $304m.
Overall, eBay reported net income of 20 cents a share, up from 15 cents a year before, while net revenue climbed 42 per cent, to $1.329bn. On the pro-forma basis on which Wall Street measures the company, earnings rose to 24 cents a share. Analysts had expected eBay to report earnings per share of 22 cents and revenues of $1.285bn.
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