The Nasdaq had a good run in the first quarter of this year, one that tech investors would have obviously liked to see repeated in Q2.
Well, it’s not quite the same story as reported in April. While the Nasdaq Composite Index climbed almost 19% from 2,600 in January to just over 3,100 at April’s end, it closed the second quarter at 2,935, down 5% over the past three months. However the quarter’s massive last-minute rally on Friday (thanks to Europe, not tech) took a bit of the sting out, with the Nasdaq rising 85.5 points to close out the period’s last day of trading.
Look no further than the big Facebook (NASDAQ:FB) IPO that flopped in May to get a sense of the quarter’s tone: expectations that were sorely unmet. Here’s a look at some of the period’s touchstones.
Oracle (NASDAQ:ORCL) did OK when it announced its latest results last week. At least they came in just slightly ahead of expectations, with revenue up 2.2% year-over-year and net income up 18.5%. Larry Ellison’s enterprise software powerhouse is starting to cash in on its move to cloud-based services. After hitting a quarterly low of $25.61, ORCL rebounded to close at $29.70, and thanks to the June 30 jump, it actually ended the period up 1.8%.
Google (NASDAQ:GOOG) has been in headlines almost constantly. Among the big news items: a stock split (now approved by shareholders), a new 7-inch Nexus tablet to take on Amazon’s Kindle Fire, a new 4.1 (“Jellybean”) version of its Android mobile operating system, the Nexus Q (a spherical content streaming device), and the absence of CEO Larry Page from some key events due to health issues. And just yesterday, Google announced that its wildly popular Chrome browserwill now be available for Apple’s iPhone and iPad. Getting Chrome onto Apple’s iOS mobile operating system is a surprising coup for Google and a bit of payback for Apple’s removal of Google Maps from its default position in iOS 6.
Analysts are looking for sales growth for the quarter of roughly 22% year-over-year and EPS of $10.16 versus $8.75 for the quarter ending March. GOOG shares opened the quarter at $646 and pretty much did a slow crawl lower, closing at $580 after a smart 2.8% pop on June 30’s rally.
Apple (NASDAQ:AAPL) announced a new MacBook Pro equipped with a Retina display and trotted out a preview of its new mobile operating system that includes a new Maps function designed to give Google Maps the boot, along with improved Siri voice querying functionality. However, iPhone sales have been slipping as potential customers hold off on buying an iPhone 4S with the new, 4G iPhone 5 due in months.
AppleInsider reported in May that Apple had reduced iPhone orders by between 20% and 25% compared to March due to slowing demand. Also, the iPhone has recently been supplanted as the best-selling smartphone at Verizon (NYSE:VZ) for the first time since the carrier began offering Apple’s phone.
Still, look for a solid report from Apple, with earnings up for the quarter by as much as 30% year-over-year. Apple is on a streak of crushing expectations, so another such quarter could really spark the stock again. It has meandered for most of the quarter well under $600 after peaking at $644 in April. It closed on June 30 at $584 — also enjoying the quarter’s last-day rebound with a 2.6% gain on Friday, but still down 2.6% for the period.
Microsoft (NASDAQ:MSFT) has surprised many people with a full-bore assault on the tablet market, with a pair of Surface tablets designed to make the most of its new Windows 8 operating system. One tablet aims at the consumer market, one at enterprise. While the hardware looks impressive, many unanswered questions remain (including price), and the dual-market strategy risks confusing buyers and discouraging developers. Microsoft’s foray into its own hardware also risks alienating tablet and Ultrabook manufacturers.
Earnings growth for the current quarter is expected to be down slightly from a year ago, but Microsoft will be trumpeting the coming third quarter. After hitting a quarterly high over $32 in April, the stock bounced around the $30 mark for most of the quarter before closing it out at $30.59, down 5.1% for the period.
Amazon (NASDAQ:AMZN) is expected to deliver a 30% year-over-year sales increase when it reports its Q2 earnings in July, but flat or even down compared to the previous quarter. And EPS is expected to take a hit. Kindle Fire sales are slowing, customers have a low satisfaction rate with the device (just 54% of owners are happy with their tablet) and Amazon is facing the unwelcome specter of competing directly against Google in the 7-inch tablet market.
Still, investors have been giving Amazon every benefit of the doubt, as the shares have enjoyed a nice ride through Q2, rising more than 12% to $228.35 at the end of the period, and its gravity-defying price-earnings ratio is around 187. Any worse-than-expected earnings news could change this state affairs — if investors ever agree to measure Amazon more like others in the tech or retail worlds.
Dishonorable Mention: It really seems like shooting fish in barrel at this point, but Research In Motion (NASDAQ:RIMM) — once the leader in the mobile sector that Apple and Samsung now thoroughly dominate — released its earnings Thursday night. And it was another disaster for RIM. Its new BlackBerry 10 and handsets couldn’t come soon enough, but yet another delay in their release — now into 2013 — means the company is basically writing off 2012. Layoffs of 5,000 staff (nearly one-third of remaining employees), net sales down 42% year-over-year, a $518 million loss on the quarter and news of the delay sent RIMM stock into a spiral. It dropped nearly 20% in Friday trading to close the period at $7.39.
That just added to its worse-than-dreadful quarterly performance: a nearly 50% drop from March 30’s $14.70 to Friday’s close.
What to Expect in the Third Quarter
Things should heat up considerably as the summer winds down. Apple will announce its iPhone 5, and if history is any indication, it’ll experience blowout sales numbers. Meanwhile, the battle for tablets should be in full swing, with Microsoft’s Surface making a play for Apple customers in both the consumer and enterprise markets, while Google and Amazon duke it out for the consumers who don’t want to pony up for an iPad or Surface. Forbes is calling for Microsoft stock to hit $40 if the Surface proves to be a hit.
At the same time, Apple and Microsoft will each be tracking sales numbers for their new desktop and mobile operating systems (OSX Mountain Lion and iOS 6 for Apple, Windows 8 and Windows Phone 8 for Microsoft), with Google also rolling out its latest Android OS version, Jellybean.
Safest bet of the coming quarter: Research In Motion will announce another losing period (or a sale or other dismemberment).