By Clare Baldwin and Ian Sherr
SAN FRANCISCO, Oct 14 (Reuters) - Tech stocks sprang higher on Wednesday after better-than-expected results and forecasts from bellwether Intel Corp galvanized investors' hopes that an industry recovery was underway.
Investors scrutinizing the battered tech sector for signs of a sustained rebound in demand after a debilitating recession took heart from Intel's forecasting revenue and margins well in excess of Wall Street expectations on Tuesday.
Intel closed up 1.66 percent at $20.83 on Nasdaq, after climbing as much as 4 percent.
Other sector heavyweights also gained as Wall Street breached the 10,000-point watermark for the first time in a year on earnings optimism. Microsoft Corp and Dell Inc both rose as much as 2 percent before Microsoft gave up some of the gains. Chip makers Advanced Micro Devices Inc and Nvidia Corp led the rally, leaping as much as 4 percent before giving up some of the gains.
'My expectation is that the Ciscos, Dells, Hewletts, etc.; the OEMs and the EMS companies like Flextronics, will have decent numbers,' said Miller Tabak & Co analyst Brendan Furlong.
'That's going to help momentum in the technology space continue. It's a sign that end demand has returned.'
Google Inc, International Business Machines Corp , and AMD are due to report earnings on Thursday.
Despite Intel's scintillating results, analysts said investors remained on tenterhooks following a tumultuous year for tech and the market in general. Robert W. Baird & Co analyst Tristan Gerra reiterated his neutral rating on Intel.
Others warned that corporate demand has to come back strongly to truly power a broad-based recovery in hardware and software demand -- but many did not see growth in enterprise IT spending until at least the middle of 2010.
Intel's shares rose nearly 2 percent on Wednesday after analysts raised their price targets for the stock. But its shares are already trading at roughly 31 times forward earnings, compared with a semiconductor industry figure of 17 times forward earnings.
Nvidia had given up its gains and reversed course to close slightly down. No. 2 PC maker Dell saw its shares close up more than 2 percent. Microsoft shares rose 1.5 percent, before giving up early gains to close up 0.58 percent.
WHAT, ME WORRY?
Corporate budgets for 2010 are not yet in place. But some analysts held out hope that next week's launch of Microsoft's Windows 7 operating system -- which is earning strong early reviews -- would kickstart a much-needed spending cycle.
'Windows 7 will drive a much-needed corporate refresh in 2010, leading to further revenue growth and substantially higher earnings,' wrote Needham & Co analyst Edwin Mok, who raised his price target on Intel's stock to $28.
UBS also raised its price target for Intel to $27 from $24 after the report, while Lazard Capital increased its target to $26 from $24.
Gerra said in a note that Intel's business is still highly sensitive to consumer demand but the company's push into smartphones and set-top boxes is 'unlikely to materially impact revenue growth in 2010-2011.'
Semiconductor equipment makers like KLA Tencor, Applied Materials Inc might not reap the same benefits.
'It isn't very relevant to the equipment makers,' said Caris & Co analyst Benedict Pang. 'If you're really talking about the semiconductor equipment stocks and where they're really looking for upside next year, it's all with the memory guys, DRAM and NAND. That's really where the recovery has to happen.'
Global oversupply has triggered a two-year decline in prices for DRAM and NAND memory which is used in computers, cell phones and digital music players such as Apple Inc's iPods.
Pang pointed out that Intel's capital spending didn't trough like that of memory makers, and equipment makers have already booked orders for 2009.
The world's top maker of memory chips and flat screen TVs, Samsung Electronics Co Ltd, reported stronger-than-expected earnings last week.
'It sets the tone. It sets the pace for semiconductor companies, particularly those with PC exposure,' said Oppenheimer & Co analyst Rick Schafer.
'Valuations for chip stocks look attractive, particularly when you consider we believe there is a positive bias, or an upward bias to earnings.'
(Reporting by Clare Baldwin and Ian Sherr; Additional reporting by Sinead Carew in New York; Editing by Edwin Chan and Richard Chang) Keywords: INTEL/ (eddie.chan@thomsonreuters.com; +1 213 955 6750; eddie.chan.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
SAN FRANCISCO, Oct 14 (Reuters) - Tech stocks sprang higher on Wednesday after better-than-expected results and forecasts from bellwether Intel Corp galvanized investors' hopes that an industry recovery was underway.
Investors scrutinizing the battered tech sector for signs of a sustained rebound in demand after a debilitating recession took heart from Intel's forecasting revenue and margins well in excess of Wall Street expectations on Tuesday.
Intel closed up 1.66 percent at $20.83 on Nasdaq, after climbing as much as 4 percent.
Other sector heavyweights also gained as Wall Street breached the 10,000-point watermark for the first time in a year on earnings optimism. Microsoft Corp and Dell Inc both rose as much as 2 percent before Microsoft gave up some of the gains. Chip makers Advanced Micro Devices Inc and Nvidia Corp led the rally, leaping as much as 4 percent before giving up some of the gains.
'My expectation is that the Ciscos, Dells, Hewletts, etc.; the OEMs and the EMS companies like Flextronics, will have decent numbers,' said Miller Tabak & Co analyst Brendan Furlong.
'That's going to help momentum in the technology space continue. It's a sign that end demand has returned.'
Google Inc, International Business Machines Corp , and AMD are due to report earnings on Thursday.
Despite Intel's scintillating results, analysts said investors remained on tenterhooks following a tumultuous year for tech and the market in general. Robert W. Baird & Co analyst Tristan Gerra reiterated his neutral rating on Intel.
Others warned that corporate demand has to come back strongly to truly power a broad-based recovery in hardware and software demand -- but many did not see growth in enterprise IT spending until at least the middle of 2010.
Intel's shares rose nearly 2 percent on Wednesday after analysts raised their price targets for the stock. But its shares are already trading at roughly 31 times forward earnings, compared with a semiconductor industry figure of 17 times forward earnings.
Nvidia had given up its gains and reversed course to close slightly down. No. 2 PC maker Dell saw its shares close up more than 2 percent. Microsoft shares rose 1.5 percent, before giving up early gains to close up 0.58 percent.
WHAT, ME WORRY?
Corporate budgets for 2010 are not yet in place. But some analysts held out hope that next week's launch of Microsoft's Windows 7 operating system -- which is earning strong early reviews -- would kickstart a much-needed spending cycle.
'Windows 7 will drive a much-needed corporate refresh in 2010, leading to further revenue growth and substantially higher earnings,' wrote Needham & Co analyst Edwin Mok, who raised his price target on Intel's stock to $28.
UBS also raised its price target for Intel to $27 from $24 after the report, while Lazard Capital increased its target to $26 from $24.
Gerra said in a note that Intel's business is still highly sensitive to consumer demand but the company's push into smartphones and set-top boxes is 'unlikely to materially impact revenue growth in 2010-2011.'
Semiconductor equipment makers like KLA Tencor, Applied Materials Inc might not reap the same benefits.
'It isn't very relevant to the equipment makers,' said Caris & Co analyst Benedict Pang. 'If you're really talking about the semiconductor equipment stocks and where they're really looking for upside next year, it's all with the memory guys, DRAM and NAND. That's really where the recovery has to happen.'
Global oversupply has triggered a two-year decline in prices for DRAM and NAND memory which is used in computers, cell phones and digital music players such as Apple Inc's iPods.
Pang pointed out that Intel's capital spending didn't trough like that of memory makers, and equipment makers have already booked orders for 2009.
The world's top maker of memory chips and flat screen TVs, Samsung Electronics Co Ltd, reported stronger-than-expected earnings last week.
'It sets the tone. It sets the pace for semiconductor companies, particularly those with PC exposure,' said Oppenheimer & Co analyst Rick Schafer.
'Valuations for chip stocks look attractive, particularly when you consider we believe there is a positive bias, or an upward bias to earnings.'
(Reporting by Clare Baldwin and Ian Sherr; Additional reporting by Sinead Carew in New York; Editing by Edwin Chan and Richard Chang) Keywords: INTEL/ (eddie.chan@thomsonreuters.com; +1 213 955 6750; eddie.chan.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.