International Business Machines Corp. (IBM), Microsoft Corporation (MSFT): Which Tech Stock to Buy Post Earnings?

International Business Machines Corp. (NYSE:IBM)The earnings season is now underway, helping investors separate the good companies from the struggling ones. A strong report is especially important for investors holding positions in technology stocks.

A few notable companies that reported earnings are listed in the table below. The results are especially relevant for investors exposed to the semiconductor, co-operate server, and the PC market:

Company Recent Price ($) Average Volume
SanDisk Corporation (NASDAQ:SNDK) 53.42 4,130,730
IBM 191.61 4,069,750
Microsoft Corporation (NASDAQ:MSFT) 30.6 49,855,600
NXP Semiconductors NV (NASDAQ:NXPI) 26.74 3,121,600

(Data Source: Yahoo! Finance)

Mixed view on x86 market

International Business Machines Corp. (NYSE:IBM) led markets lower when the company reported earnings of $3 per share, missing estimates by $0.05 per share. Revenue also missed consensus estimates by $1.28 billion, as the company generated sales of $23.41 billion. Quarterly results for International Business Machines Corp. (NYSE:IBM) were hurt by weakness in hardware.

Sales declined 17%, while power systems sales dropped 32% from the previous year. Chips and storage were also weak, declining 16% and 11%, respectively. IBM blamed deals closing late as a reason for the miss, and held its 2013 forecast.

Media is speculating that International Business Machines Corp. (NYSE:IBM) will sell its CRN x86 server unit.

Unlike IBM, Microsoft Corporation (NASDAQ:MSFT) shares rose after the company demonstrated strong server software sales. The results allayed fears that declining PC sales would hurt the company. Microsoft Corporation (NASDAQ:MSFT) is planning to release Windows 8.1, which will bring the Start button back, and will also allow users the option to boot directly into a “desktop” mode.

Microsoft Corporation (NASDAQ:MSFT) reported a 23% rise in Windows 8 sales, a 5% increase for Office 2013 pre-sales, an 11% increase for Server and Tools, and an 18% increase in sales from online services. Microsoft is also lowering its forecast for operating expenses, from $30.3 billion – $30.9 billion to $30.2 – $30.5 billion.

Semiconductors shine

NXP Semiconductors NV (NASDAQ:NXPI) beat estimates and also gave a rosy forecast for the current quarter. NXP expects its revenue to match consensus at $1.12 billion – $1.18 billion. Earnings will be $0.62 – $0.70 per share.

A weak spot for NXP was the PC and mobile chip unit. Sales dropped 12% from the previous quarter. Overall, margins grew to 50%, up from 46% last quarter.

Storage supplier SanDisk Corporation (NASDAQ:SNDK) earned $0.84 per share, beating estimates by a full nickel. Revenue was $1.34 billion. SanDisk benefited from strong NAND flash prices, as sales of solid-state drives (“SSD”) rose 20%.

SanDisk also increased its R&D spending by 21%. The company is developing embedded mobile offerings, while continuing to develop better SSD products.

Conclusion


International Business Machines Corp. (IBM), Microsoft Corporation (MSFT): Which Tech Stock to Buy Post Earnings?

SNDK data by YCharts