Earnings concern kills tech rally

The biggest technology rally since October was knocked cold, as disappointing earnings reports punished Microsoft and left Apple in danger of its worst-ever loss of market value.

Five days after Google’s earnings spurred the largest one-day wealth creation by any US stock, computer and software shares are tumbling. Apple, Microsoft and Yahoo retreated on disappointing results. Apple, the world’s most valuable company, dropped almost 7 per cent in late trading, a slump that would wipe more than US$50 billion from its value.

Hopes were high for the industry as earnings season began, with technology shares leading a rebound in US equities after overseas tensions eased. The Nasdaq Composite Index on sales of US$49.4 billion.

Apple forecast continued growth, saying it may have revenue of US$49 billion to US$51 billion in its fiscal fourth quarter, which ends in September. That was short of the average estimate for US$51.1 billion, according to data compiled by Bloomberg.

Apple has sold 183 million iPhones in the first three quarters of this fiscal year, up 41 per cent from the same period last year. Typically it brings out new iPhones in September. rallied to an all-time high on Saturday after Google surged 16 per cent, adding US$65 billion to its market capitalisation.

Futures on the Nasdaq 100 Index slid 0.1 per cent in the regular session, halting an eight-day rally of 7.5 per cent that pushed it to a 15-year high.

IBM dropped 5.9 per cent during regular trading yesterday after sales fell for a 13th quarter.

Microsoft slid 4 per cent following its largest-ever quarterly net loss, hurt by a US$7.5 billion writedown after the purchase of Nokia’s handset unit failed to rescue the company’s mobile business. The Washingtonbased software giant posted a net loss of US$3.20 billion, reversing a profit of US$4.61 billion a year ago.

— Bloomberg

“The investor focus should turn squarely to the new iPhone and whether they can top the recordbreaking December quarter of 2014 when they sold 74.5 million phones,” said Walter Piecyk, an analyst at BTIG. “We’re going to have this, as we always do, this September lag quarter, as everyone waits for the new iPhone product launch, which is still the largest driver of whether the company grows earnings or not.”