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Western Carolinian Volume 68 Number 08

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  • TECH ECONOMY: Major-company profits, online ad sales and digital products brighten the technology sector's long night. The year 2003 began with a question mark and ended with an exclamation point, said Intel chief financial officer Andy Bryant. {@ 2004 Washington Post photo iffustration) Three Earnings Jumps Make Tech Sector Smile By Mike Musgrove | The Washington Post Wall Street got three snapshots of a tech industry on the rebound Wednesday. with upbeat earnings reports coming in from Yahoo Inc., Intel Corp. and Apple Computer Inc. Though these three iconic tech firms occupy different parts of the industry, the positive financial results are the latest indication that the tech industry is stirring from its slump. But executives and analysts sounded several notes of caution, mainly because there is little evidence yet that corporate spending is picking up. Also, some analysts said the good news is unlikely to satisfy investors who have bid up the three stocks in recent months, anticipating even higher returns. For the businesses themselves, they are taking good news where they can get if, : The year 2003 began with a question mark and ended with an exclamation point, said Intel chief financial officer Andy Bryant at the start of a mostly cheery conference call with analysts Wednesday, before diving into the nitty gritty of profit margins, inventory levels and semiconductor industry trends. For Intel, with earnings of $2.17 billion (33 cents per share), it was the best quarter since 2000. Intel posted revenue of $8.74 billion Wednesday, topping the $8.73 billion recorded in the third quarter of 2000. A year ago around this time, Apple posted a loss of $8 million, or 2 cents per share, for its first financial quarter of the year, which ends in December. This time, buoyed by its success in the emerging business of selling music online, the Cupertino, Calif.-based computer maker reached earnings of $63 million (17 cents); revenue for the quarter hit a four-year high of $2 billion, up from $1.47 billion for the period a year ago. Ft was an outstanding quarter for Apple, chief executive Steve Jobs said in a statement. The company shipped 733,000 units of its popular iPod digital music player over the holiday season, a figure that is beginning to rival sales of the companys desktop and laptop computers, Yahoo, meanwhile, had a surge in online advertising payments to thank for a strong fourth-quarter performance. The Sunnyvale, Calif., company said net income for the fourth quarter was $75 million (11 cents), up from $46.2 million (8 cents). The bulk of Yahoos revenue growth came from advertising and marketing, not paid content, even though the company has been pushing hard to diversify into fee- based content over the past year. Revenue for the quarter totaled $663.9 million, more than double the $285.8 million in the year-ago quarter. Internet ads generated 82 percent of the total, or $546 million, up 187 percent over the previous years final quarter. Revenue from subscriptions and other fees amounted to $85.2 milliow, up 37 percent over the $62 million it got from fees a year earlier. Despite modest increases in fee growth, chief executive Terry Semel noted the number of people paying Yahoo for services more than doubled last year. Yahoo ended 2003 with nearly 5 million people paying it for some service, up 122 percent over the 2.2 million it had at the end of 2002. Earnings Improve Three well-known tech firms posted positive financial results, the latest indication the industry may be stirring from its slump. Quarterly net $75 million ahoo _ In millions of doflars iv j i it Vv Apple Computer $63 million in millions of dollars Intel inbillionsafdollers Sain Note: Quarters ate for fiscal years, SQURCE: Rews 2004 THE WASHINGTON POST Semel said he sees continued improvement in the Internet ad market. While industry analysts are forecasting Internet ad sales to climb about 20 percent this year, Semel said he expects Yahoos ad sales to jump 25 to 30 percent. In an interview, Semel said the company will be more inventive with new paid services it plans to roll out this year, including a music download store. We are actively looking at a number of other alternatives, he said. _ Digitized entertainment and products that fet users enjoy the benefits of the Internet have been contributing factors to the good fortunes of both Apple and Intel. Apple, with its iPod and its popular iTunes online music store, has been one of the success stories of the past year. The company said 30 million songs have been sold through its service, and the company gained an important ally: Rival computer giant Hewlett-Packard Co. announced it will license the iPod and sell an HP-branded version of the player starting this summer. For Intel, meanwhile, much of the credit for its strong performance goes to its Centrino brand, a set of chips sold in laptops that can wirelessly connect to the Internet. Analysts say that the companys marketing for the chip bundle sparked a jump in sales across the industry. i Ina way, Intel has led the chip industry out of a downtum, said Manoj Nadkarni, founder of investment site ChipInvestor.com. The Centrino launch brought awareness to WiFi even if you didnt buy Intel products. Intel is on the prow! for new markets to conquer. It recently announced a $200 million investment fund to be spent investing in start-up companies working on technologies that will encourage the flow of computer chips into stereos and TV sets Semiconductor analyst Dan Scovel said that while digital televisions and set- top boxes will eventually spell a new source of profits for the company, it will take a few years to get there. Meanwhile, he said, Intel continues to be dragged down by the PC, a product that, in his estimation, has matured, meaning that its high-growth days are over. The three positive earnings reports impressed some analysts Wednesday, though one pointed out that the upbeat results haven't meant much in the way of new jobs yet. This falls in the category of a broad-based recovery, Roger Kay, director of client computing at research firm IDC, said Wednesday. If there was a lot of job growth then I think people would be feeling a lot better ... (but) when its this broad- based, it looks like its got some legs. Despite the good times, at least one question lingers: When will corporate tech spending return? Normally a mainstay of the tech economy, corporate technology spending is still down. Gary Beach, group publisher of CIO magazine, a publication aimed at business customers of technology, said corporate buyers have been giving him mixed reviews of how business is faring. Twenty percent say its raining, 20 percent say its sunny, 60 percent say its some sort of cloudy, he said. 4 2004 WASHINGTON POST (Staff writer Leslie Walker contributed to this report.)
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