Jones Lang LaSalle

Intel, Yahoo Profits Disappoint, Fueling Growth Woes (Update1)

Jan. 18 (Bloomberg) -- Intel Corp. and Yahoo! Inc. posted profits that missed analysts' estimates, sending technology stocks lower on concern that growth may be slowing across the industry.

Shares of Santa Clara, California-based Intel, the world's biggest semiconductor maker, traded at the equivalent of $23.35 at 11:55 a.m. in Germany, down 8.5 percent from yesterday's close on the Nasdaq Stock Market. Yahoo, owner of the most- visited Web site, slumped 11 percent to $35.59. The Dow Jones Europe Stoxx Technology index declined 2 percent to 293.35.

``It's ugly stuff,'' said Mike Green at Benham & Green Capital Management in La Jolla, California. He manages $100 million including Intel shares. ``Their numbers are disappointing across the board.''

Intel's fourth-quarter profit and revenue missed estimates yesterday as sales of chips for desktop computers trailed the company's forecast. Yahoo, facing mounting competition from Google Inc., said it spent more developing software for cell phones and televisions. The two are among the first technology companies to report earnings for the quarter, which included the holiday season, and investors had expected a rosier outlook.

While International Business Machines Corp. also yesterday reported sales that missed analysts' estimates, profit beat predictions and the shares gained in extended U.S. trading. Apple Computer Inc., maker of the iPod music players, follows with its fiscal first-quarter report today and Motorola Inc., the No. 2 mobile-telephone maker, reports tomorrow.

Intel

Investors were surprised by Intel's report, which showed sales missed a forecast given less than six weeks ago. The company is the second-biggest technology company by market capitalization behind Microsoft Corp., making it a potential harbinger of reports to come. Redmond, Washington-based Microsoft the world's largest software maker, reports Jan. 26.

Intel said net income rose 16 percent to $2.45 billion, or 40 cents a share. Sales rose 6.3 percent to $10.2 billion. Sales this quarter may miss the lowest analyst estimates, Intel said.
Intel lost market share and demand for desktops computers didn't come in as high as it typically does during the holidays, Chief Financial Officer Andy Bryant said in an interview. Chip prices declined, limiting profit further.

Market Share

Advanced Micro Devices Inc., Intel's only rival in personal computer chips, reports fourth-quarter earnings today. Intel's Chief Executive Officer, Paul Otellini, said he expects to get share back this year.

``The miss seems to be as a result of share loss and price reductions due to competition,'' said Sangeeth Peruri, an analyst at New York-based J & W Seligman, which manages $20 billion and owns Intel shares. ``Intel is going to lower prices to regain share.''

For 2006, Intel expects sales to gain 6 percent to 9 percent from 2005's $38.8 billion, marking the first year in four that Intel won't post sales growth of more than 10 percent.

Analysts at Goldman, Sachs & Co. lowered their estimate for 2006 earnings to $1.25 a share from $1.36, and cut their 2007 prediction to $1.20 a share from $1.46. The analysts left their recommendation on Intel stock unchanged at ``in line.''

Citigroup Inc. analysts cut their share price estimate to $26 from $32 and lowered their recommendation to ``hold'' from ``buy.'' Piper Jaffray & Co. lowered its price estimate to $25 and reduced its rating to ``market perform.''

Yahoo

Yahoo, based in Sunnyvale, California, reported profit of 16 cents a share excluding some items, missing an estimate of 17 cents by Jefferies & Co. analyst Youssef Squali in New York, whom StarMine Corp. ranks among the most accurate Web analysts. Squali's estimate matched the average of 34 analysts in a survey by Thomson Financial.

While net revenue of $1.07 billion matched predictions, some investors had hoped the company would do better, said Piper Jaffray & Co. analyst Safa Rashtchy, who rates Yahoo shares ``outperform.'' He described the results as ``pretty disappointing.''

Sales growth of 39 percent was the lowest in more than three years as Yahoo Chief Executive Officer Terry Semel fought Microsoft and Mountain View, California-based Google for Web users and advertisers. Yahoo ranks second to Google in Internet search.

``I'm still scratching my head,'' said Rashtchy, who is based Menlo Park, California. ``It does seem like they may be losing some share in search.''

IBM

IBM, the world's largest seller of computer services and No. 2 software company behind Microsoft, reported a 13 percent rise in profit to a record $3.19 billion, or $2.01 a share. Sales fell 12 percent to $24.4 billion, missing the $25.6 billion estimate of UBS AG analyst Benjamin Reitzes.

Profit before costs to restructure pensions rose to $2.11 a share, beating Reitzes's estimate of $1.94.

Services sales declined 5 percent to $12 billion, missing estimates, amid falling demand in Europe, Armonk, New York-based IBM said yesterday. Some companies may be holding off purchases that they will eventually be forced to make, said John Jacobs of Charleston, West Virginia-based Jacobs & Co., which manages about $150 million, including IBM and Intel stock.
The biggest concern for investors is whether the world economy may slow as rising oil prices curb spending, Jacobs said.

``If the world economy slows down because of oil, then all bets are off,'' Jacobs said. ``The market is nervous about that.''