Wall Street Beat: Earnings Season So Far Shows Signs of Hope

IDG News Service — As quarterly financial reports start to pour in from IT bellwethers like Google, Nokia and Intel, industry insiders are not worried so much about what happened last quarter as what's in store for the rest of the year.

Judging from results so far, as well as some industry reports on the PC sector, the first quarter went about as badly as -- and in some cases a little better than -- expected. What's more important, there are signs that some sectors of IT have hit bottom for the year.

In a sign that the recession is taking a bite out of Google, considered practically an unstoppable force in Internet search advertising, revenue for the company declined from the last quarter of 2008, its first sequential revenue decline ever. Revenue for the first quarter was US$5.5 billion, up 6 percent from last year but down slightly from $5.7 billion in the fourth quarter last year.

However, Google also reported Thursday that its first-quarter net income increased to $1.4 billion from $1.3 billion in the same period a year earlier. Excluding one-time items, earnings per share were $5.16, handily beating expectations of analysts, which were $4.93, according to Thomson Reuters.

Though the revenue decline shows that top-line growth is slowing, investors pushed up company shares by $9.62 to $398.30 in after-hours trading within an hour of the announcement. One reason why some investors may not be too worried about the sequential revenue decline is that Google at some point has to succumb to the law of large numbers: Essentially, the larger a company is, the harder it is to maintain top-line growth, especially in a recession. The better-than-expected profits also were cause to cheer.

Also Thursday, Nokia reported what was expected to be a terrible first quarter, as sales of mobile phones dipped below 100 million units. Revenue for the period was €9.3 billion (US$12.3 billion), down 27 percent from a year earlier. Profit went into free fall, hitting €4 million from €1.2 billion a year ago.

Nevertheless, there was a silver lining to the report. "Nokia expects industry mobile device volumes in the second quarter 2009 to be at approximately the same level or up slightly sequentially," the company said in its financial report, suggesting that it has seen a bottom to the handset market.

That cheered investors, who pushed company shares up by $1.52 to close at $14.88 for the day.

Intel's story Tuesday was similar, in that officials suggested they may have seen the worst this year. Though the company declined to provide specific guidance for the rest of the year, CEO Paul Otellini said in a statement that "We believe PC sales bottomed out during the first quarter and that the industry is returning to normal seasonal patterns."

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