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The Market Ticker - Tapegasm: IBM, INTC and YHOO

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Let’s look at Intel first.

The market was impressed.  Should it be?

  • Revenue $12.8 billion, up $2.5 billion, 25 percent year-over-year
  • Gross margin of 61 percent, down 2 percentage points year-over-year
  • Operating income $4.2 billion, up $710 million, 21 percent year-over-year
  • Net income $3.2 billion, up $718 million, 29 percent year-over-year
  • EPS 56 cents, up 13 cents, 30 percent year-over-year

Those are pretty solid numbers, all-in at first blush.  Q/o/q they’re flat on Net income and EPS, which given the 1st quarter is pretty good.  The outlook was positive as well.  Surprise-surprise, the PC is not dead, although if I’d like more color on the “other architecture” increase (as that was ridiculous.)  I’m also interested in the sustainability of the data center group numbers as well.  Atom, meh.  That’s an interesting data point and I’m going to watch it.

Bottom line: Intel continues to execute.  My cautionary note would be on margins – historically there’s a margin compression event that occurs with refresh cycles.  Intel appears to be projecting that they have beaten this monster.   We’ll see.

Yahoo also got a nice little pop, but far less impressive:

The problem here appears to be the agreement with Microsoft; including costs revenue less TAC (acquisition costs) was down 6%, and ex that agreement flat.  Meh.  GAAP revenue was also down substantially, 24% on GAAP.  Take out doing it “by the book” and it was still negative – but less-so.

Net earnings were 17 cents, which was a “beat”, but again, down 23% from last year’s 22 cents.  That’s not so good either on first blush, but those numbers were noisy – in both years.  Is it fair to “ex-items” them?  Maybe.  If you do, they improved y/o/y.

I don’t like the free cash flow decrease from 2010.  That’s one of my key metrics, and it’s going the wrong way.  Not by a lot, but this is a number to watch.  Yahoo has also been repurchasing shares which exposes it to larger than you might expect swings should they miss down the road on earnings as the divisor gets smaller.  Repurchases make good news look better but bad news look much worse.  No free lunch.

Then there’s IBM, which produced an orgasmic response on the original release of the numbers.  It didn’t last long though:

What happened?

Nothing in the original release on IBM’s web site looks like trouble, so what’s the problem?  Simple: Doug Kass tweeted on it - signings.  $10.5 billion, two billion under expectations.  If global growth is “continuing” and there are no problems how did IBM come up short almost 20% on new signings in the last quarter?

Hmmmm….. Unfortunately I wasn’t at my terminal aftermarket and able to take full advantage of this, but if there’s a slowdown being indicated here this is rather likely to be sussed out over the next few days and weeks and it’s probably not confined to IBM. 

Watch the SOX on this point – technically, it looks like crap, having broken below both the 50 and 100MAs and finding scant support down at the lower Bolinger.  If it’s going to rally it should happen from here – further deterioration, especially if a new low is made under 410 or so, would be quite bearish.

Read more at Karl Denninger – The Market Ticker



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