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After a late June rally, the Nasdaq is back in positive territory for the year. However, as evidenced by chip-equipment maker Novellus Systems' (Nasdaq: NVLS ) earnings last night, many end buyers in the technology sector are getting cautious about the second half of the year.
With that in mind, we're taking a look at three companies reporting earnings that technology investors should be watching. These reports could say quite a bit about the businesses as they go forward.
Fool contributor and Rule Breakers analyst Tim Beyers
Fools who were bearish on Akamai (Nasdaq: AKAM ) in February have turned optimistic ahead of the company's second-quarter earnings report, due July 27. Usually, such head-nodding leaves me queasy. After all, the best returns are almost always generated by going against the crowd. But in this case, I think they're right.
Why? Management said back in February to expect accelerating growth heading into the second half … and now that we're in the second half, I expect strong guidance. Streaming volume should be up -- helped by a re-up of its relationship with Netflix (Nasdaq: NFLX ) -- while the introduction of Apple's (Nasdaq: AAPL ) iCloud should provide more downloading work. (Though, as analyst Dan Rayburn rightly points out here, the bigger opportunity would be a video version of iCloud.)
There's also e-commerce and mobile to consider. A new survey from the Pew Research Center finds that 35% of Americans now own a smartphone. Of this group, 87% access the Web or email on their device with 68% using these services daily.
With so much complex information flowing over the Web to so many devices, I find it difficult to envision a scenario in which Akamai's network isn't delivering record amounts of data. So you might say I'm sticking with the horse I rode in on eight years ago. (Akamai was the subject of my first article for the Fool.) Maybe that's naive, but in my experience, Akamai's managers tend to make good on their pledges. I think they will again.
Fool contributor Anders Bylund
There's an oft-overlooked player in the smartphone wars that should treat investors very well over the next couple of years. Lost in the shadow of early mobile-chip technology leader ARM Holdings (Nasdaq: ARMH ) , investors have left MIPS Technologies (Nasdaq: MIPS ) for dead, dropping share prices by 60% over the last 6 months. I think that's a huge mistake.
Sure, nearly every smartphone on the market today sports an ARM-based design. The British technologist is nearly 10 times the size of MIPS in terms of sales and income, so why should you care about the smaller company?
Simply put, you'd be investing at the ground floor of a potential rocket ride that should mirror that of ARM closely. MIPS chips are only now making their way into Android phones and tablets, contributing to the company's sales for the first time in the quarter that ended this March. There's no denying the power of a first-mover advantage, but MIPS is starting from exceedingly low expectations here after a couple of disappointing earnings reports.
That gives investors a large margin of error and plenty of room to grow. You can buy MIPS shares for less than 15 times trailing earnings today (yes, the company is profitable) while ARM trades for nearly 100 times earnings. Given that much of ARM's early success is already priced into the stock, which chip technologist would you rather own?
Both companies report results on July 26 -- ARM in the morning and MIPS at night. We'll hear more about MIPS' Android uptake, and I think it'll be good news this time.
Fool editor and contributor Eric Bleeker
As noted by my colleague Rick Munarriz earlier today, analysts are not upbeat about Thursday's second-quarter report from Google (Nasdaq: GOOG ) . In fact, over the past 90 days they've hosed down estimates from $34.61 to $33.86 per share. That's in large part due to a massive hiring and spending binge instituted by new CEO Larry Page. Google -- and some of Larry Page's programs in particular -- have been known to devote large amounts of spending to programs with little revenue at the end of the tunnel. From that perspective, investors are right to be wary of assessing how Page will lead the company.
However, Google is also known to drop valuable nuggets of information in its earnings releases and subsequent earnings calls, like YouTube revenue growth, mobile advertising revenue, and more information on display advertising revenue growth. I wouldn't be surprised to see Google add a layer of discussion concerning its newer social programs like Google+.
So whether you see Google's increased spending as a good long-term defense of its core search business or a potential wasteful distraction, answers should come this Thursday. If you're taking a look at investing in Google, this is one report you should keep an eye on.
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