Best of US fail to lift markets

Microsoft comes through a troubled year to beat forecasts

There were strong performances from some of the biggest firms in the US as they reported their earnings on Tuesday.

But this failed to boost the stock markets, which were more concerned about renewed interest rate fears.

Higher than expected inflation figures for June rocked confidence and the markets fell back from recent gains.

The technology-weighted Nasdaq Composite Index tumbled 97.50 points, or 2.3%, to 4,177.17.

Looking forward

Traders turned their attention towards testimony on monetary policy to be given on Thursday by Federal Reserve chairman Alan Greenspan.

Analysts said Wall Street reacted tepidly to positive news on corporate earnings because it had already factored in a rosy profits picture.

"The economy has been very, very strong, and companies with a lot of exposure to economic activity have been showing good numbers for the past quarter," said Charles Lemonides at M&R Capital Management.

"It should hardly be a big surprise."

Microsoft

Microsoft said its profits rose 10% in the fourth quarter, topping Wall Street estimates as gains on the software giant's investments offset weaker operating income.

The Redmond-based giant said profits rose to $2.41bn, or 44 cents a share in the quarter, compared with $2.20 billion, or 40 cents a share, a year earlier.

Analysts had expected Microsoft to earn 42 cents a share.

Revenues met expectations at $5.8bn, compared with $5.76bn a year earlier.

Most analysts had trimmed their revenue forecasts for Microsoft after the company warned last quarter that business demand for personal computers was looking weak.

Shares in Microsoft rose to $79-3/32 in after-hours trading, just after the company announced earnings. The stock closed at $78-1/2 in regular trading, up $5/16.

Intel

Intel reported second-quarter profits that were a penny ahead of analyst forecasts, boosted by a whopping gain on the sale of investments as sales rose 23% from a year ago.

Intel said that for the quarter ended 1 July it had net income of $3.52bn, or 50 cents a share, an increase of 98% from $1.78bn, or 26 cents, a year ago.

Sales rose to $8.3bn from $6.75bn, including more than $2bn from the sale of some stakes it holds in more than 100 companies but excluding acquisition-related costs and are adjusted for a 2-for-1 stock split.

On that basis, the results were slightly ahead of analyst forecasts of 49 cents a share.

Intel shares fell $3-5/16 to $143 amid a broad slump in shares of high-technology companies, but the stock is close to its year-high of $147-1/2 and above its 52-week lows of $62-3/4.

Apple

Apple reported higher third-quarter sales and earnings and said it shipped nearly 450,000 iMac systems during the third quarter.

The company said it earned $200m, or 55 cents per share in the third quarter, compared with $203m, or 60 cents per share, in the same period last year.

Earnings in the latest period include a gain of $37m, or 10 cents per share, from the company's sale of shares in Arm Holdings.

Excluding that gain, operating income was 45 cents per share, narrowly surpassing the the consensus forecast among analysts, of 44 cents.

Sales rose 17% to $1.83bn, but a study has shown that Apple Macintosh US market penetration is lower than it was four years ago, despite the success of the iMac.

The study by Media Metrix found that 3.8 million US households owned a Mac in January 2000, compared with 4.9 million in 1996.

General Motors

GM reported record second-quarter profits of $1.75bn, topping Wall Street estimates even as its automotive earnings slipped against strong results a year ago.

Profits from continuing operations climbed to a record $2.93 per diluted share, from $2.66 per share, or $1.73bn, a year earlier.

This compares with analysts' forecasts of $2.82 per share.

Revenues rose to $48.7bn from $45.1bn a year earlier.

GM shares rose by $3/8 to $60-3/4 on the New York Stock Exchange. The shares had touched a 2-1/2 year low of $57-4/16 on 30 June.

"It's a good number, but it's what they should have reported," said analyst Gary Lapidus of Goldman Sachs.

Time Warner

Time Warner announced better than expected earnings thanks to a strong advertising market.

Operating profits were up 12% in the second quarter to $1.38bn, from $1.24bn, after advertising growth in both the company's cable and publishing divisions.

The company is due to complete a merger with America Online later this week, which will create one of the world's largest media and internet companies.

Costs associated with the merger and litigation at one of the company's former theme parks put pressure on Time Warner's bottom line.

Net profit was only $72m, compared with $575m, but revenues were higher at $7.1bn, from $6.5bn.