Earnings and Acquisition Define Tech Sector Thursday

Brittney Barrett |

The major indexes continued a four day rally on Thursday, as talk of coordinated central bank action began to relax anxiety surrounding the continued struggles of the European financial sector. Discussion of a potential credit freeze as a consequence of the debt crisis made for tense trading, even as the market crept higher.

The tech sector mimicked some of that uncertainly, as investors clung to earnings and acquisition news while other major components of the sector chugged along on low volume.

Among the stocks ticking higher on Thursday was long beleaguered search engine, Yahoo (YHOO), which seemed like a safe bet following the Wall Street Journal report that the company is entertaining a potential bid from the private equity firm Silver Lake. While Yahoo has signaled that it’s not desperate to complete a deal at the moment, investors expressed support for the possibility.

Beyond implying that Yahoo is a worthwhile acquisition target, the announcement drew attention to the fact that while Yahoo tends to be overshadowed by Google (GOOG) and has failed to increase revenue in the last several years, it reliably turns a profit. There was also the acknowledgment that among other efforts to increase its relevance and sway within the tech world,  the company is considering a bid on the media streaming corporation, Hulu LLC and/or and advertising partnership with Microsoft Corp.(MSFT) and AOL Inc. (AOL) Shares of both Microsoft and AOL  benefited from the association.

Other stocks getting attention Thursday included Netflix (NFLX). Shares of the movie rental service plummeted following the reduction of its third-quarter subscriber prediction. Netflix altered its forecast to account for 1 million fewer subscribers than it had predicted in late July. The downtrend in subscribers is presume to be largely the result of price increases for the company’s viewing service. There was no shortage of public griping following the considerable price hike, sound an alarm for some investors that Netflix could soon be entering a period of decline. Those prediction appear to be on point, a near 20 percent drop for the day bring Netflix down 40 percent decline from Netflix’s historical peak in July. The company is now in the red for 2011.

The steep tumble in share prices for the day seemed a dramatic reaction considering Netflix did not modify its financial guidance from its original levels, but the current trajectory has many running for the door.

Netflix believes that the decline will be temporary and that their decision to divide services and raise prices will eventually help improve services and benefit shareholders long term.

What was a loss for Netflix was a boon to its rivals, including Redbox owner Coinstar (CSTR). Shares of Coinstar, which operates popular video kiosks for $1 per rental across the country, shot up considerably for the day.

After hours, Blackberry market Research In Motion (RIMM) took a hard fall after  reporting a severe earnings decline.  Sales of its line of BlackBerry smartphones and tablets have been buckling against competition from the ever-evolving iPhone and other options. The 29 percent slide far surpassed analyst forecasts and lead investors to abandon the stock in droves after the bell when the announcement was made.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
CVX Chevron Corporation 98.78 -0.44 -0.44 5,774,429
MSFT Microsoft Corporation 56.90 -0.53 -0.92 21,687,177
YHOO Yahoo! Inc. 42.29 -0.51 -1.19 12,743,419

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