For the final word on the topsy-turvy week in technology stocks, we turn to the bland, ahem, poetry of those champions of big hair and bold pioneers of dreck-rock, Journey:
"Wheel in the sky keeps on turnin'
I don't know where I'll be tomorrow."
Sure, it's as deep as the kiddy pool, and just as likely to give off a discomforting smell. But how else to summarize the turbulent fortunes of the stock prices, earnings numbers and even the longer-term strategies of some of the tech world's biggest names?
You had companies like
, whose prospects had until this week been seen as somewhere between hopeful and encouraging, find themselves stranded in the sleet and rain. Conversely,others like
, which only a quarter ago were hammered because their numbers weren't fantastic enough, were once again looking like they were made of silver, not of clay.
As a result, the
rose 0.7% this week but
underperformed its blue-chip counterparts, while the
Morgan Stanley High-Tech Index
suffered modest dips.
Intel, for example, saw an initial pop in its stock on Thursday, the day after it posted first-quarter earnings numbers that were in line with what investors' were expecting. But after rising as high as $19.93 Thursday morning, the stock closed the week at $19.06 as investors recalled that the quarter they were expecting from Intel really wasn't worth celebrating anyhow.
What champagne do you serve when your profit sinks 38%, the biggest decline in four years? That's not the stuff of Moet & Chandon; it's more of a Korbel moment. The damage that archrival
Advanced Micro Devices
is wreaking on Intel's numbers is really beginning to become evident. AMD's share of the market is rising, its gross margins in the first quarter surpassed those of Intel and, according to Current Analysis, its chips were in 55% of PCs sold in the U.S. in March.
So after decades of toiling, AMD is finally eating into Intel's dominant market share for PC chips. Intel said its revenue this year would be down 3%, its first annual decline since 2000. This is not the story of Intel as it's been told for years: The chipmaker might face competition in new areas like wireless devices and medical technology, but would always reign supreme in PCs. Now that's not such a sure thing anymore.
The bad news at Intel spread quickly to its prime customer, Dell, which stumbled in the face of its own discouraging data. Research firm Gartner said PC shipments in the first quarter grew 13%, but Dell's share fell to 16.5% from 16.9%. Instead,
share is gaining. Anyone expecting Wall Street to shrug off that news as a one-quarter aberration got a shock when analysts delivered reports on Dell that sometimes read like first drafts of eulogies.
Bear Stearns wrote, "Dell appears to have focused on profitability at the expense of volume." And Citigroup smacked its Dell price target down to $28 from $35, arguing that the advantages the computer maker had long enjoyed, such as online sales and customized PCs, are being matched by competitors. Yet Dell has no second act to propel itself forward in coming years.
As a result, Dell has no choice but to start accepting lower profit margins, Citigroup argued. That would be a pill with two kinds of bitterness: First, lower margins mean lower profits, and that sucks a lot of market cap out of a stock. Second, it's essentially a capitulation on Dell's part that it no can no longer rule the PC market.
News was much better among the Internet leaders Yahoo! and Google. When these companies reported earnings in January, investors reacted as if the good times had passed for both of them. But that's not the case this month. Yahoo! came into the earnings season with expectations for another disappointment but matched estimates of 11 cents a share. That in turn triggered hopes that Yahoo! would have a strong year in 2006, hopes that -- if this pattern keeps up -- will once again deviate from reality and lead to a Yahoo! selloff in July.
Google had even better numbers, with revenue rising 79% and profit beating the Street's estimates by 31 cents a share.
But that wasn't the end of the news in the Internet sector. There was enough jockeying among players to suggest that fortune's wheel may not be done spinning in this industry. On its earnings call, Yahoo! CFO Susan Decker not only boasted about how the company's search engine queries were growing by 15% to 20% a year, but said the site had 500 million visitors a month and 3.8 billion page views a day. (Google declined to put up comparable figures in its conference call.)
, meanwhile, reportedly put forth its effort to compete with Google by offering an online storage system. And it hired Steve Berkowitz to head up the search efforts on its MSN site. Berkowitz was a driving force behind Ask.com, and was seen as responsible for the search engine's growth in the past year under
-- a time when every other engine's share of the search market fell except for Google's.
, waking up to the growing threat that Google presents to its e-commerce empire, is talking with Microsoft and Yahoo! to find ways of teaming up to fight the Mountain View mauler, according to
The Wall Street Journal
. eBay earlier in the week met Wall Street's forecasts, but delivered what many thought was soft guidance, leaving it in the still-can't-do-anything-right camp.
But one might say to eBay,
Don't stop believin'
. As long as the tech industry's wheel in the sky keeps on turnin', there's reason to hope that investors can faithfully embrace it with open arms, giving it support any way it wants it. If not, tech stocks may end up going separate ways.
Bill Snyder is off this week.