When all you read is gloom, turn here for a much different perspective.

Sunday, April 26, 2009

Anyone Want to Bet on Technological Advances?

There has been so much focus on banks recently that people may have overlooked fairly significant technology income in this past quarter. More importantly as this earnings season has rolled on, leader after leader in the technology space has surprised investors. Their earnings press releases are full of optimism for their business in 2009. Many of these firms have liquid assets well beyond the majority of US banks.

So how did these businesses fare in Q1? What did these technology leaders have to say about the prospects for the future?

1. Electronics and Chip Leader - Intel (INTC)
In the first-quarter, profit far exceeded analyst views. With close to $11B of cash and short term investments, Intel's CEO Paul Otellini said, "We believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal patterns."

2. Software - Oracle (ORCL)
In 2008, Oracle grew profits 29% as it passed IBM in software sales during the year to become the second-largest software maker behind Microsoft. Total 2008 profit: $5.52 Billion. Its fiscal third quarter ended February 28, 2009. Its profit was up 4% to $1.9 billion for the quarter easily beating analyst estimates. Safra Catz, Oracle’s President said, "We generated $8.0 billion in free cash flow over the last twelve months and we are running our business at record operating margins." Prior to Oracle announcing that it will purchase Sun Microsystems (JAVA), Oracle had approximately $12B of cash and short term investments available.

3. Computers - IBM (IBM)
On April 20th, IBM also reported a profit for Q1. Its earnings too were well ahead of the Street's profit expectations. Samuel J. Palmisano, IBM chairman said, "We are well-positioned to continue to move aggressively and leverage our strong cash performance to make the most of the opportunities that arise, including smarter plant initiatives and other strategic options. We remain ahead of pace for our 2010 roadmap of $10 to $11 per share." IBM has about $13B of cash on the books.

4. Technology Services - Accenture (ACN)
Accenture's quarter also ended on Feb. 28, 2009. They too reported a healthy growing income of $677 million. William D. Green, Accenture’s chairman said, "We continued to grow market share, and our results in the [this] quarter reflect our intense focus on the disciplined management of our business. We believe we are well-positioned to continue to deliver significant value to our clients and shareholders." Accenture has $3B in cash.

5. Defense Technologies - Northrop Grumman Corp (NOC)
Northrup reported first-quarter earnings of $389 million up from $264 million a year ago. Northrop also raised its 2009 continuing operations forecast to a range of $4.65 to $4.90 a share, from $4.50 to $4.75 a share. "We're pleased with our first quarter financial results, and we're confident that our products and capabilities continue to be extremely well aligned with current and emerging national security priorities," said Ronald D. Sugar, chairman. Northrup has $1.5B of cash.

So not only does economic life roll on for technological innovation, it appears as though these leaders are well positioned to thrive in 2009. When it comes to prognostications of future economic activity, let's place our bets with these leading business teams, not gloomy perma-bear economists.

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