Micron Declines Weighing on Already Sagging Tech Sector

Brittney Barrett |

Micron Technology (MU)led tech stocks lower today after the company reported  weak quarterly earnings on late on Thursday. Shares plummeted and Micron became the S&P 500’s worst-performing stock in earl trading by a land slide.The chip industry has had its up and downs since the disaster in Japan with analysts attempting to asses the long-term impact on semi-conductor creation and consumption. The release of earnings from Micron Technology, a memory chip maker, has elucidated the impact. Slow PC sales and difficulties with one of the companies core clients, Nokia alongside pricing disparies all has a negative impact on sales for the company. The combination of these factors drove Micron lower by close to 40 percent in the past two months. Investor reaction mirrored this and much of the tech sector was sent lower in spite of continued analyst bullishness.

Micron missed the expectations of banks from UBS to Credit Suisse but the breakdown of the losses seemed to assure them that there is still a considerable draw to the stock. A weakened DRAM environment did little to detract from the stocks improvements in gross and operating margins which led CSLA, UBS and Stifel Nicolaus to maintain their “buy” assessments. That said, most cut back their price targets.

Micron was not the only company on the tech sector to release their earnings today; however. Business software and hardware maker, Oracle Corp (ORCL). also unveiled their results for last quarter and while there was growth, it fell short of the company’s expectations, disappointing shareholders. Though it failed to reach itse own forecasts, Oracle did succeed in beating Wall Street estimates with an overall revenue rise of 13 percent from the same period in 2010.

Shares declined in the aftermath after a drop in hardware sales for the quarter on anticipation of 12 percent growth dragged down results and optimism surrounding the company. Fiscal fourth-quarter net income amounted to $3.2 billion, or 62 cents a share, a considerable rise from $2.4 billion, or 46 cents a share during the 2010 quarter. Revenue reached $10.8 billion.

Even techs seemingly unstoppable force Google (GOOG) crashed to its 9-month low on Wall Street suspicion that growth is beginning to wane at the company. Earlier in the year, facebook overtook Google in traffic, downgrading the search engine to number 2. It also lost business in the billion-plus China market last year which could have contributed to major growth in the future. Raymond James reported that paid search spending year-over-year declined more than anticipated on weakness in European and US businesses. It confirmed that finance has been solid but that the outlook for the remaining two-quarter of 2011 is mixed. There has also been talk of dropping expectations for the year.

Raymond James adds the second-half outlook is mixed, with some search engine marketers expecting a rebound while others “are lowering annual expectations.”

This downward trajectory began on the 17th when Research in Motion (RIMM), the makers of Blackberry, released earnings that sunk well beneath Wall Streets already weak estimates for the company. Some analysts had been promoting the stock and suggesting buying on the dip, but the latest results could dissuade even the optimistic. The company’s share price has plummeted more than 50 percent since February and continues to fall.

Earlier in the week, Yahoo (YHOO) slid lower on rumors that the company could be looking to replace their CEO and Apple fell beneath their 200-day moving average, indicating a potential downward trend hitting the top of the tech-sector.

 

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
AAPL Apple Inc. 113.75 0.66 0.58 12,999,092
DPLO Diplomat Pharmacy Inc. 27.59 -0.87 -3.06 337,829
GOOG Alphabet Inc. 776.06 -6.95 -0.89 534,450
MU Micron Technology Inc. 17.54 -0.46 -2.56 11,761,865
ORCL Oracle Corporation 39.32 0.02 0.05 2,171,133
YHOO Yahoo! Inc. 43.28 -0.09 -0.20 2,273,821

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