Market briefing---Lane(medium)
Microsoft---Bob (fast)
Nasdaq---Anthony (slow)
NYSE---Deb (fast)
welcome to bloomberg’s “world financial report”. i’m lane bajardi in new york. microsoft’s fiscal fourth quarter earnings were just released. bob bowden has been chuvening all the numbers and comments. bob, what do they tell us.
>> interestsing aspects to the company’s report. microsoft’s revenue and revenue forecasts beat expectations. let’s break down the numbers for the previous quarter, the fiscal fourth quarter. microsoft reported 23 cents a share in earnings. that behind the 24 cent analysts expectation. when it comes to revenue for the previous quarter they beat expectations at $8.07 billion. now let’s turn to the forecast. i want to show tu earnings there. you see what appears to be a miss. microsoft sees fiscal first quarter earnings at 23 cents a share. analysts looking for 25. but i put two asterisks there to let you know about something. microsoft said that there were six cents of compensation expenses that was built into this 23 cent number. if you remember a couple weeks ago microsoft said that instead of expensing stock options they would be giving stock to employees. this is what they are calling the six cents much compensation expenses. i talked to first call and how analysts are treating these compensation expenses is not yet clear. by tomorrow first call will have called the various analysts and found out exactly how they will be accounting for these kinds of expenses. meanwhile the 23 cents may not be a miss compared to the 25, if analysts account―or if―in other words if the analysts do not account for these employee compensation expenses the same way that microsoft does. nevertheless, a 23 may turn into a 29 if they add that number back in. moving on to the forecast for the current quarter, that’s where microsoft again beats expectations, just the revenue forecast, just as in the revenue for the previous quarter. you see revenue 7.9 to 8.1. that is the forecast for the current quarter. really the mid point of that range is pretty much where analysts were guessing, $7.95 billion. turning to the full year you also see revenue higher than expected. we’ll begin with the earnings for the full year. microsoft seeing fiscal 2004 earnings 85 to 87 cents a share. in the press release they said about 24 cents were employee expenses. so if you add 24 cents into that range, then you do have them reaching the analysts’ forcasts for the earnings. over on the revenue side of the full year forecast, they beat expectations as well. right now we are seeing microsoft shares up in the extended hours trading. they had been up around 2% and we’ll watch those numbers as they go.
>> anthony massucci has more on microsoft’s earnings. the software stocks to watch in tomorrow’s trading from the nasdaq market site.
>> let’s talk a little more about microsoft. we actually talk to transamerica fund manager chris bonovicco ahead of microsoft earnings. he helps manage $6 billion. he told us the market is focused on earnings and outlooks. with microsoft in mind he told us he saw one bright spot in the tech sector and it was microsoft. he just added to his position in microsoft ahead of tonight’s news. he said he thinks they got it right when they eliminated stock options and decided to reward shareholders. he said with this kind of environment, with slower revenue growth you need to reward shareholders. he thinks that long-term microsoft’s earnings growth will go up 10%. that is his outlook on microsoft. again, let me give you some stocks to watch besides microsoft. keep an eye on oracle shares tomorrow which will move right along with microsoft. peoplesoft, they said earnings met estimates. sales beat estimates. keep an eye on peoplesoft. also siebel, those are sort of the big three competitors, right along with microsoft. much smaller, obviously, but tend to trade with microsoft. a few more names to watch. veritas, r.s.a. security. they actually said they see two to five cents on their current quarter outlook. four cents is what analysts were looking for. issx is another internet security company, software company. keep an eye on the software stocks . wanted to make one point on intel. the stock was only down 1.5%. i say that as other stocks were down more than 2%. the nasdaq itself down almost 3%. we did have a note from analysts yesterday saying that intel was really a specific story, not really spreading to other semiconductor stocks , possibly why we saw the stock following 1.5%. back to you in the studio.
>> anthony massucci at the nasdaq. treasury securities sold off for a third day after a series of better than expected economic reports. some investors are now worrying that the rise in bond yields may actually slow growth down. bloomberg’s economics editor michael mckee is here with that story.
>> you know the benchmark 10-year treasuries yield rose above 4% for the first time in quite some time this week. that came after federal reserve chairman alan greenspan offered an optimistic assessment of the economy to congress. that outlook was bolstered by a report that builders started work on 1.803 million homes at not annual rate lacht month, 3.7% more than in may. initial jobless claims, meanwhile, tumbled last week by 29,000 to 412,000. and the federal reserve bank of philadelphia’s general economic index increased to 8.3 this month from four in june, an index measuring companies’ expectations for growth over the next six months rose to 56.9, the highest since february, 1993. the good news did send bonds tomorrow ball game earlier today. the 10-year treasury note now, however, is flat on the day, probably connected, traders say, to the microsoft news. although the change is just coming out. the two-year and three-year notes are little changed on the day as well. the two-year note yield 1.4%. but over the past week things have changed a lot from the time when yields last month were declining to the lowest level since the 1950s on speculation slow economic growth would lead to even slower inflation or even deflation. today economists at bear stearns forecast that by the end of 2004 the 10-year yield may rise to 5.5%, and the fed will be raising rates in march. some fret that rising yields might choke off a recovery just as it’s getting started. the average rate on a 30-year fixed home mortgage jumped for a fourth straight week this week to 5.67%, that according to freddie mac. yet mortgage applications rose again last week about 1%. well, a year ago the average yield on a 30-year mortgage was 6.49%, so that may explain why people aren’t too concerned. most analysts say rates would have to rise a lot more than they have to threaten growth. investors have to keep in the back of their minds that alan greenspan made it clear this week the fed will keep interest rates low for as long as needed. his comments may have capped bond losses a bit. yields haven’t been able to break through the 4% level.
>> and they are not doing it now with the microsoft news pushing it down. important to keep an eye on the bond yields. michael mckee. deborah kostroun is at the new york stock exchange. lots of news from there. be, take it away.
>> that’s right, lane. in fact, kind of focusing in on earnings. that was the big story today. you had i.b.m. on one end, nokia then you had good news out of caterpillar. in fact, david faller, president of lincoln equity management oversees $2 billion, he says the market did a decent job of anticipating these earnings. in fact he says we just had a market runup every substantially. he says that probably is enough to cause the market to kind of stall out. we are seeing this market stall out now for three days. many people not too concerned about what we’ve been seeing. down 43 points at today’s close. and in fact, gill night helps manage $12 billion. he says we are satisfied with the second quarter numbers that are going to be an many prompt. he says while the market may have already discounted some of those gains, he says we are not thinking that it sells off in any great direction here. of course, what we are expecting for the―for s&p 500 members, we are looking at second quarter profits to have risen about 6.9%. remember, that is an increase, just over last week we were expecting second quarter profits to increase 5.2%. so those expectations already performing quite well, given the earnings that we’ve already had. now, today i.b.m., that was the biggest drag on the dow jones industrial average. the big concern, software sales really not ramping up here, according to the c.f.o. capital spending coming into question here just a little bit. then nokia, in fact nokia, only was it the most actively traded stock at the new york stock exchange, this stock typically trades about 10 million shares. we saw 78 million shares being traded about that area. up 20% in today’s session, and that after saying their third quarter handset revenue may fall and also sales from their networking business will drop as much as 20%. so many other stocks to talk about. caterpillar not only hitting a 52-week high but a four-year high. this as their second quarter profit increasing, and also increasing their 2003 profit forecast. lane, now to you.
>> deborah kostroun at the big board. so we’ve covered stocks and bonds for you. how about commodities? a quick look at commodity trading with the price of crude oil in new york rising on expectations of increasing refinery demand after a government report showed a decline in u.s. inventories. it closed at $31.52 a barrel. gold futures rose for the fifth time in six sessions closing at $344 an ounce. still to come, we’ll look closer at what microsoft had to say and speak to dan morgan of noble financial about his view on the microsoft numbers.
