Tech stocks are leading the Dow Jones Industrial Average (^DJI 0.96%) and the broader stock market higher after Intel (INTC 4.88%) reported better-than-expected earnings and Apple (AAPL 0.38%) and IBM (IBM 3.44%) announced a partnership to go after enterprise customers. As of 1:30 p.m. EDT the Dow was up 69 points to 17,128. The S&P 500 (^GSPC 1.51%) was up eight points to 1,981.
Source: Finviz.com.
Intel is the top Dow Jones Industrial Average stock today, up 7.5% after the company reported earnings that walloped expectations, upped its guidance for the year, and announced a $20 billion buyback plan. Earnings came in at $0.55 per share, up 41% from the year-ago quarter's $0.39 per share and above analyst expectations of $0.52 per share. Revenue came in at $13.8 billion, beating analyst expectations of $13.7 billion.
Intel's PC group, which makes up a little over 60% of revenue, saw sales grow 6% year over year as businesses bought more PCs last quarter. Referring to sales, CFO Stacy Smith said, "PCs have stabilized." Average prices were down 4% year over year, but revenue grew volumes rose 9%, in part driven by Microsoft's decision to stop supporting Windows XP.
Going forward, Intel raised its Q3 revenue guidance to $14.4 billion, above analyst expectations of $14 billion, and it now expects full-year revenue growth of 5%, above analyst expectations of 3.5%. The company also raised its buyback program by $20 billion. Intel bought $2.1 billion of its own stock in Q2 and says it will spend $4 billion this quarter.
Amid all the good news, the stock is also being pushed higher by upgrades and target-price raises from analysts. Most notably, UBS upgraded its rating on Intel from "Neutral" to "Buy" and raised its price target from $30 to $37.50, explaining, "Intel's estimate that 600 million enterprise PC still need to be upgraded provides enough visibility through the rest of 2H14."
It's not all rosy, though. While Intel reported record earnings and is attempting to return value to shareholders through a large share repurchase, the company's competitive advantage looks to be weakening. This quarter Intel's mobile revenue fell to just $51 million dollars, and the division reported a loss of $1.1 billion. The PC market is now just a small part of the worldwide computing market as mobile and tablet usage continues to surge. Intel is making some progress but as of yet has not made many inroads into that market. While PCs will always be here, they will continue to be commoditized.
Apple and IBM team up
Apple is one company that has certainly figured out the mobile market. One key area in which Apple's competitors have outshone it is the enterprise market, where businesses are concerned with security and data control. Last night, Apple and IBM announced a deal in which the companies will jointly develop over 100 enterprise solutions for use on Apple's iPhone and iPads. Further, IBM will begin selling iPads to its business customers around the world. This is good news for both companies (and terrible news for Blackberry), as it opens new markets to them both. It also is good for Microsoft, which earlier this year started selling its Microsoft Office suite of products on iOS. As more businesses switch to iPads and iPhones, it will mean more demand for Microsoft's software as well.
