Why AMD and IBM are Falling as Google Rallies

Shares of AMD and IBM fell on Friday as Google shares posted a modest gain.

Jul 18, 2014 at 11:30AM

The Dow Jones Industrial Average (DJINDICES:^DJI) posted a modest gain early on Friday, rising more than 80 points as of 11:20 a.m. EDT. The gain comes despite the fall in shares of  Dow Jones heavyweight IBM (NYSE:IBM) -- the tech giant lost around 0.4% in morning trading. Other tech stocks were active as well, including AMD (NASDAQ:AMD) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL).

IBM drops following quarterly results
IBM's financials came in better than analysts anticipated on Thursday: The company posted earnings per share of $4.32 on revenue of $24.36 billion, better than consensus estimates of around $4.29 earnings per share and revenue of $24.12 billion. IBM reiterated its guidance for the fiscal year, pledging total yearly EPS of $18.

Yet IBM shares fell. Investors may have been focused on revenue declines in individual segments; IBM's services business declined modestly, its global technology services revenue fell 1.3% year over year, and its services backlog dropped 1% on an annual basis.

These are not major declines, but they may be significant in the context of IBM's ongoing transformation. With the company selling its commodity hardware businesses, it is focused on services more than ever before.


Source: Wikimedia Commons

Google rallies despite missing on earnings
Google contrasted sharply with IBM: Shares of the search giant rose on Friday even though the company's earnings of $6.08 fell short of analyst expectations of $6.25.

Revenue, however, was a bit better: $12.67 billion exceeded expectations of $12.32 billion.

Investors may have been keying in on paid clicks and cost per click -- the lifeblood of Google's advertising business. In that sense, things were good: Paid clicks rose 25% on an annual basis. Cost per click declined 6% year over year, but that was better than a 9% annual decline last quarter.

During its earnings call, Google revealed that 1 million Chromebooks were sold into schools -- a record quarter for the company's budget laptops. Management also said its Chromecast streaming dongle was as popular as ever, though it declined to reveal exact sales figures. At any rate, it's great news for Google, as Chromebooks and the Chromecast help drive use of its cloud services.

Also of note, Nikesh Arora -- Google's chief business officer -- announced that he was leaving the company to join SoftBank, a Japanese tech and telecommunications conglomerate. At SoftBank, he will be CEO of Internet and media operations.

The loss of Arora could be a blow to Google, as he's been at the company since 2004 and has held his current position since 2011. Investors, however, do not seem particularly phased.

AMD plunges after earnings report
AMD shares lost almost one-fifth of their value early on Friday after the company reported a disappointing quarter. AMD announced that it had earned $0.02 per share, slightly less than the $0.03 analysts had been expecting. Revenue of $1.44 billion was largely in line with consensus estimates.

However, guidance came in light: AMD expects third-quarter revenue of around $1.42 billion to $1.51 billion. Prior to the report, analysts had been looking for about $1.57 billion.

AMD shares had experienced a notably rally in recent months. Prior to Friday's sell-off, shares had gained more than 20% since AMD last reported earnings. Investors may have been expecting a rebound in PC sales to help AMD blow away analysts' expectations.

To make matters worse, two firms (Merrill Lynch and FBR Capital) downgraded AMD in the wake of its report. Both cited weak guidance and a lack of visibility.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers