Let’s get the bad news out of the way first.
The Red Sox lost and it’s the Tampa Rays (hard to believe I’m even writing these words) who will move on to play the Phillies in the World Series.
It’s not like I can count on the Patriots this year, either. Sigh.
Back in the real world, on Wall Street, the credit markets are showing some signs of warming up. At least, the street thinks so, as the markets soared another 400 points today. My sources tell me that investors are also hearing that new bailout program – this one focusing on the home mortgage owner – will take shape and pass into law in time for next spring’s house-hunting season. Specifics are sketchy but the talk is that Uncle Sam will back mortgages for troubled homeowners at a reduced interest rate of 5.25%. That number is low, I believe, and will be renegotiated upward 50 basis points or so before any bailout passes.
Even so, like seeds planted in spring with months to go to harvest, the long-tem economic clouds are lifting. But the short-term clouds very much remain and they’re pouring cold water all over the tech industry these days, with a few exceptions.
One of those outliers is Netflix, the online DVD rental company. With consumers snapping shut their wallets, a cheap DVD from Netflix is the 2008 equivalent of a big night out, price-wise at least, for the anxious U.S. consumer. Overall, Netflix saw its Q3 revenues rise 30%, earning $20.4 million, or 33 cents per share, for the three months ended Sept. 30, compared with $15.7 million, or 23 cents per share, in the year-earlier period. Overall revenues rose 16 percent to $341 million, from $294 million last year. Thomson Reuters says its survey of expected a profit of 31 cents, on revenue of nearly $343 million for Q3.
That all helped Netflix’ stock, which climbed 82 cents to $24.62.
The news wasn’t so good at Sun Microsystems. Sun is a more viable barometer of the tech sector’s relative health these days – and the patient isn’t looking too perky. Sun, the
fourth-largest server maker in the world, says it expects to report a quarterly loss of 25 cents to 35 cents per share for the quarter ended in September. Worse, Sun predicts Q3 revenue between $2.95 billion to $3.05 billion, compared with $3.22 billion in the same quarter last year. Wall Street expected Sun to do better, estimating losses at a mere penny per share on revenues of $3.14 billion
Texas Instruments is yet another tech giant (get used to it for a quarter or two) to disappoint investors, albeit by a penny or two. The semiconductor maker reported a profit of 43 cents a share in the third quarter on sales of $3.39 billion, against earnings of 52 cents a share on sales of $3.663 billion last year. TI pegs earnings of 30 cents to 36 cents a share in the fourth quarter, below analysts' consensus forecast of 42 cents a share. The company's sales outlook of between $2.83 billion and $3.07 billion for the fourth quarter also is lower than expectations of $3.34 billion.
Based on international sales, especially in the Pacific Rim, I had bet that that semiconductor stocks would be the last to suffer. And, indeed, TI says revenues should rise moderately in Q4. But the overall trend is dour, if you define “dour” by a quarter or two.
But we’re all in this together and we’ll all ride it out together. If you have cash, both Sun and Texas Instruments should be great long-term plays – maybe two years out.
As for Netflix, don’t ask me – I’ve taken a cue from my 14-year-old daughter and started watching movies on the Internet for free.