Profits are down, but tech stocks are up

A computer store employee stacks copies of Microsoft's new operating system, Windows 7, ahead of its official launch in London

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KAI RYSSDAL: Not that we needed a whole lot of reminding at this point. But just in case, Microsoft brought it to everyone's attention again today. In a recovering economy, even down is up. The software maker's announced this morning profits fell 18 percent in the latest quarter. Its stock then hit a 16-month high. Why?

Those three little words we've been talking about all week. Things were better than expected. In fact, they're looking pretty darned good. And not just at Microsoft either. Tech, in general, is on a tear.

Marketplace's Mitchell Hartman reports.


Mitchell Hartman: Looking back, Microsoft sold a lot of Xbox game consoles. And recovering PC sales helped boost its other businesses. Looking forward, there's lots of interest the new Windows 7 operating system.

Katherine Egbert: They sold a billion and a half worth of Windows 7 to consumers and that was about 20 percent above estimates.

Equity analyst Katherine Egbert at Jefferies & Company says Microsoft is creating buzz again.

Egbert: 700 people lined up yesterday in Phoenix, Ariz. to get into the first Microsoft retail store, and so there seems to be a good amount of interest.

Interest in buying software and PCs, among consumers who've been reluctant to spend on anything. But Egbert's quick to point out, the bigger trend here -- for Microsoft and its peers -- is the flight to online shopping. Which is why companies like Amazon, which hit a record high today, are actually leading this tech charge.

Egbert: Clearly, people are buying from Amazon, and in order to do that you need a PC. The Apple numbers the other day, they did well selling Macs. I think there's a case to be made for surfing the Internet being a cheap form of entertainment.

It's also a cheap way to buy stuff, says IDC market analyst Karsten Weide.

Karsten Weide: The market is just much more transparent, in other words, I can compare prices much more readily than I could off-line.

So are we looking at another tech bubble?

Weide: We again have sort of a wave of hype. But what is true is that the Internet will change everything. We've really only seen the beginning of it.

So this time around, the hype may just be real.

I'm Mitchell Hartman for Marketplace.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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