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Wall Street Beat: Tech earnings highlight weakness in social network sector

Marc Ferranti | Feb. 10, 2014
Tech sector earnings this week stirred concerns about growth for social media companies LinkedIn and Twitter but highlighted positive trends for some networking and cloud services companies.

Akamai shares closed at $57.18 Thursday, jumping up by almost $10. Shares lost some momentum Friday afternoon, trading at $56.59, but were nevertheless up significantly for the week.

For Alcatel-Lucent, wireless access, including LTE networks, was the star product category in the fourth quarter. Sales related to fixed access and IP transport products also boosted revenue.

The financially struggling company had good news Thursday, reporting a net profit of €134 million (US$182 million), compared to a €1.56 billion loss for the year-earlier period. Sales were €3.93 billion, down 0.1 percent year on year.

Though the company still has to show that it can increase revenue, the profit is a good way to start showing that CEO Michel Combes' Shift plan to turn the company around is having an effect.

Combes took the helm of the financially beleaguered company about a year ago. The Shift plan, announced last June, calls for the company to get rid of US$1 billion in assets and become profitable by next year. The company announced this week that it has received an offer from China Huaxin for its enterprise unit, which makes IP telephony and Ethernet switching equipment. The offer values the unit at €268 million. Alcatel-Lucent will keep a 15 percent stake in the business.

Company shares are traded in Europe and are not included in the U.S. indexes, but its success in LTE and IP products bodes well for those sectors.

Though IT sector earnings reports have been fairly strong over the past few weeks, tech company shares have had a bumpy ride, reflecting overall market volatility. Shares on U.S. exchanges have trended down so far this year. Though major exchanges ended Friday up for the day overall, tech company shares on the Nasdaq are still down by about 2.5 percent for the year. Weak economic growth in emerging markets has been a main concern. This week, IDC said the tech market would also be hit by weakness in emerging markets.

"IT spending will be inhibited by the economic slowdown in emerging markets in 2014," IDC said in a statement. "An inevitable deceleration in the growth of smartphones and tablets" would also have an impact on overall spending, IDC said.

IDC lowered its forecasts for IT market growth in Asia/Pacific, Central and Eastern Europe (CEE), and the Middle East and Africa (MEA), which in turn brought down its forecast for worldwide IT spending growth to 4.6 percent this year in constant currency terms, from the previous forecast of 5 percent.


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