What You Need to Know About These 11 Tech Bellwethers in 2011

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 |  Includes: AAPL, CSCO, DELL, GOOG, IBM, INTC, MSFT, ORCL, QCOM, VIAV, YHOO
by: Investment Underground

By Roger Choudhury

Investment Underground looked into the health of technology bellwethers, and their abilities to move this market forward. This key sector remains the largest growth area for the US economy and its markets.

Cisco (NASDAQ:CSCO) made $42.36 billion in revenues in the trailing 12 months ending in January 2011. This was an increase of 19.2% from the same period a year ago. For FY 2010 (August 2009 to July 2010), revenues grew by 10.86%. Net income rose by 24.8% to $7.57 billion, whereas in FY 2010, they increased by 26.6%. The return on invested capital was 12.56% versus 14.3% in FY 2010. The EBT margin was 21.19%, but 23.5% in FY 2010. Also, the profit margin was 62.4%, and 64% in FY 2010. The current ratio is 2.81 with a healthy debt to equity ratio of 0.27. The most recent EPS was $1.32, implying a P/E of 14.

The Company forecast a Q3 EPS of $0.35 to $0.38 per share. So, the EPS would be $1.30 to $1.33 for the 12 months thru the end of Q3. That would still be an increase of 10.1% to 12.7%. The PEG ratio falls in the range of 1.10 to 1.38. Moreover, the 30 day put/call ratio is 0.5.

Recently, Cisco announced its intent to acquire privately held Pari Networks, a leading provider of network configuration and change management and compliance management solutions. The Company also completed the acquisition of privately held LineSider Technologies, a leading provider of network management software that helps customers build the network services necessary to securely create and deploy cloud computing infrastructure. In addition, Cisco and BMC Software forged a strategic alliance to develop and market new solutions for large-scale, multi-tenant cloud computing infrastructures.

Since the Q2 earnings announcement on February 9, CSCO share price is down 15.6%.

Dell (NASDAQ:DELL) made $61.49 billion in revenues, for the fiscal year ending in January 2011. This is an increase of 16%, after falling 13% in the previous 12 months. Net income came in at $2.6 billion or an increase of 84%. In contrast, from January 2009 through January 2010, profits fell 42%. The ROIC is 11.39%, when taking out only accounts payable and accrued and other liabilities from total assets to get invested capital. The EBT and profit margins were 5.4% and 18.5%. For the same time periods in 2010, 2009, 2008, and 2007, the EBT margins were 3.8%, 5.4%, 6.26%, and 5.8%, respectively. The profit margins were also 17.5%, 17.9%, 19.09%, and 16.57%, respectively. The current ratio is 1.49 with an unwieldy debt to equity ratio of 3.97. The current P/E is 11.7 under an EPS of $1.35.

For its fiscal-year 2012, Dell expects revenue growth of 5% to 9%, non-GAAP operating income growth of 6% to 12%. The rosiest scenario yields an EPS of $1.45, and a PEG ratio of 1.58. The 30 day put/call ratio is 0.7. Since the full year results announcement on February 15, DELL share price is up 12.3%.

International Business Machines (NYSE:IBM) churned out $99.87 billion in revenues, which was an increase of 4.3% in 2010, after falling 7.6% in 2009. The ROIC was 29.55% in 2010. In 2010, 2009, 2008, 2007, and 2006, profit margins were 46.07%, 45.72%, 44.06%, 42.2%, and 41.89%, respectively. The respective EBT margins came in at 19.75%, 18.9%, 16.1%, 14.67%, and 14.57%. ROE was 64.94%. The current ratio is 1.19 with a robust D/E of 0.95. EPS increased by 15.08% in 2010 to $11.52, and so the P/E is 14.0. The 30 day put/call ratio is 0.9.

IBM said that it expects to deliver full-year 2011 GAAP earnings per share of at least $12.56. This gives a PEGY ratio of 1.31.

IBM will also pay out a $0.65 per share dividend on March 10 for investors of record at February 10. The current yield is 1.6%.

Since the release of the 2010 performance, January 18, IBM shares are up 7.9%.

Intel (NASDAQ:INTC) drew in $43.6 billion in revenues in 2010, which is an increase of 24.19%, after declining 6.5% in 2009. Net income came in at $11.46 billion (+162.39%). In 2009, profits were only $4.36 billion (- 17.4%). In 2010 and 2009, profit margins were 65.3% and 55.69%, respectively, and the EBT margins were 36.78% and 16.2%, respectively. ROIC climbed to 24% in 2010, after posting only 10.28% in 2009. The current ratio is 3.39 with a minuscule D/E of 0.04. EPS jumped over 160% to $2.01, implying a P/E of 10.6.

Using Intel’s Q1 estimates of $11.5 in revenues and several expense deductions, EPS is projected to come in at $0.51. This implies an EPS of $2.10 for the year thru Q1 2011. 12 months through Q1 2010, EPS was only $1.09. Intel had a great 2010, and options investors believe 2011 will be robust due to a 30 day put/call ratio of 0.4.

However, JP Morgan analyst, Mark Moskowitz, lowered his expectations for PC shipments in 2011 on Monday, prompting Christopher Danley, the JP Morgan analyst who covers Intel, to suggest that Intel’s stated guidance is too optimistic. Danley also said in a research note that he thinks Intel’s production rates are too high for lower PC market demand.

Intel shares are up only 0.7% since the earnings release on January 13.

JDS Uniphase (JDSU) grew 33.7% in revenues in the trailing 12 months through December 2010, after falling 5.37% in FY 2010 through June 2010. The Company brought in $1.6 billion in revenues, and made $13 million. In contrast, the Company lost $62 million in FY 2010. The profit margin was 42.38%, and 40.1% in FY 2010. The EBT margin was 1.08%, but - 4.19% in FY 2010. The ROIC was 1.1%, but - 5.2% in FY 2010. The current ratio is 2.93 with a D/E of 0.29. After 10 straight years of negative EPS, through December 2010, it was $0.06. So, shares have a P/E of 411.

For Q3 2011, assuming the company makes $440 million in revenues with an 11% operating margin, a conservative EPS estimate would be $0.175, making an EPS of $0.295, for the trailing 12 months. Juxtapose that with - $0.56 for the same period through Q3 2010. The Company seems to be turning a corner. Additionally, the 30 day put/call ratio is a bullish 0.4.

The most recent quarter (Q2 2011) posted record revenues of $477.2 million. On March 1, the Company presents at the Morgan Stanley Technology, Media & Telecom Conference in San Francisco.

Microsoft (NASDAQ:MSFT) made $66.69 billion in revenues and $20.56 billion in profits in the year through December 2010. These were respective increases of 13.6% and 26.5%, from the same period in 2009. The profit and EBT margins were 79.16% and 40.6%. At the end of FY 2010 in June, the profit and EBT margins were 80.16% and 40%, respectively. ROIC was 37.94%, and 38.5% in FY 2010. The current ratio is 2.45 with a D/E of 0.20. Because EPS was $2.35 through December 2010, shares trade under a P/E of 11.3.

The low EPS estimate is $0.49, and the high EPS estimate is $0.61 for Q3 2011. The Company’s actual EPS was $0.45 in Q3 2010. A middle-of-the-ground EPS is $0.55, so the implied range is $2.39-$2.45-$2.51 for EPS through the end of 2010. For the same period in 2009, EPS was $1.93. The 30 day put/call ratio is 0.6.

Microsoft announced it has now sold over 300 million Windows 7 licenses, and Windows 7 is now running on over 20% of Internet-connected PCs. Windows Phone 7 also launched during Q2 in 30 countries and on 60 operators and 9 different devices. Microsoft announced developers are adding Windows Phone 7 applications to the marketplace at a rate of over 100 per day.

MSFT is down 7.6%, since the earnings announcement on January 27.

Oracle (NYSE:ORCL) made $31.99 billion in revenues and $6.77 billion in profits in the 12 months through November 2010. These were respective increases of 37.7% and a 16.7%, from the previous 12 months. Profit and EBT margins were 75.38% and 28.4%, respectively. For FY 2010 that ended in May, profit and EBT margins were 78.5% and 30.7%, respectively. ROIC was 14.46%, and 14.75% in FY 2010. The current ratio is 2.45 with a D/E of 0.43. The most recent EPS was $1.33 with a P/E of 24.7.

The Company has yet to give guidance on earnings for Q3 2011, although analysts give estimates of $0.42 to $0.50 for EPS. This would project $1.53 to $1.61 in EPS through the end of Q3 2011. The equivalent figure through Q3 2010 was $1.11. The 30 day put/call ratio is 0.8.

ORCL is up 7.9%, since the earnings release on December 16, 2010.

Qualcomm (NASDAQ:QCOM) made $11.66 billion in revenues through December 2010, which was growth of 10.4% from the comparable period a year ago. FY 2010 that ended in September, saw 5.5% growth in revenues. Profits through December 2010 were $3.57 billion, which was an increase of 71%. In FY 2010, profits grew by 103.96%. Through December 2010, profit and EBT margins were 67.17% and 36.94%, respectively. In FY 2010, profit and EBT margins were 68% and 36.7%, respectively. ROIC was 15.46%, and 14.98% in FY 2010. The current ratio is 3.13 with a D/E near zero. EPS was $2.17, so P/E hovers at 27.4. The Company raised previous guidance for FY 2011 EPS to $2.91 to $3.05, which would be increases of 18% to 24%. For the low end estimate, the current PEG ratio is 1.42. Also, the 30 day put/call ratio is 0.4.

With the earnings release on January 26, QCOM is up 15.6% since then.

Yahoo (NASDAQ:YHOO) made $6.32 billion in revenues and $1.24 billion in profits in 2010, which was a decrease of 0.02% in revenues, but an increase of 105.6% in profits. In 2009, saw revenue fall by 10.38%, but profits rose by 40.9%. In 2010 and 2009, profit margins were 58.4% and 55.55%, respectively, and EBT margins were 16.9% and 8.89%, respectively. ROIC was 9.35% in 2010, and 5% in 2009. EPS came in at $0.90, implying a P/E of 18.2.

The Company expects operating income to come in between $130 million and $160 million. Through Q1 2010, EPS was $0.56. The 30 day put/call ratio is 0.4.

In 2010, Yahoo! spent $159 million in acquisitions, which is lower than expected. The Company bought Associated Content, Citizen Sports, and Indonesian social network Koprol. In other news, on February 10, the Company introduced Livestand, a digital newsstand that continually offers new content to consumers, based on their interests. Launching first for tablets, Livestand will enable publishers and advertisers to distribute content across tablets and mobile phones.

Yahoo! shares are down 0.2% since that announcement, but are up 1.9% since the earnings release on January 25.

Apple (NASDAQ:AAPL) put up an efficient ROIC of 36.8%, for the trailing 12 months ending in December 25, 2010, and also produced $76.28 billion in revenues. In fiscal years 2010 and 2009, revenues grew by 52% and 32.1%, respectively. Profit and EBT margins were 38.76% and 28.5%. ROE was 36.8%. Ending in September, profit margins in 2010, 2009, 2008, 2007, and 2006 were, 39.38%, 40.14%, 34.3%, 33.97%, and 28.98%. The respective EBIT margins were 28.4%, 28.1%, 21.2%, 20.86%, and 14.59%. The current ratio is 1.85 with a D/E near zero. Apple shares trade under a P/E multiple of 19.6, given that the most recent annualized EPS is $17.93. This is an EPS growth of 63% from the previous 12 month period. The 30 day put/call ratio is 0.7. Given the put/call ratio of below 1, most investors believe that AAPL is undervalued.

Apple expects $4.90 per share in earnings in Q2 2011. This implies an EPS of $19.43 for 12 months, and a forward P/E of 18.1. EPS was $12.96 from Q3 2009 to Q2 2010.

On Thursday, February 24, Intel introduced “Thunderbolt technology,” a new high-speed PC connection technology. Running at 10Gbps, this permits the transfer of a full-length HD movie in less than 30 seconds. This was developed in technical collaboration with Apple, and is available first on Apple’s new line of MacBook Pro laptop computers.

Within the past 5 days, AAPL is up 0.7%. Since Apple’s Q1 earnings release on January 18, Apple shares are +1.3%. (Read more about our opinion on Apple here.)

Google (NASDAQ:GOOG) made $29.3 billion in revenues in 2010, which is a year-on-year increase of 23.98%. In 2009, revenues only grew by 8.51%. Profits climbed 30.4% to $8.5 billion, after another good showing in 2009 with a rise of 54.26%. The ROIC was 19.07% in 2010, and 20.3% in 2009. The EBT margins in 2010, 2009, 2008, 2007, and 2006 were 36.8%, 35.4%, 26.86%, 34.19%, and 37.8%. The respective profit margins were 64.47%, 62.6%, 60.4%, 59.9%, and 60.16%. The Company produced an EPS of $26.31 in 2010 or +29.9% from 2009. GOOG trades with a P/E of 23.3.

As a policy, the Company does not give guidance on earnings. The Street’s consensus is $8.12 for Q1 2011, implying an EPS of $28.50 for 12 months until then. So, the PEG ratio is 0.78. Also, the 30 day put/call ratio is 0.8.

On April 4, Larry Page, Google Co-Founder, will take charge of Google's day-to-day operations as CEO. Sergey Brin, Google Co-Founder, will continue to work on strategic projects and on new products. Eric Schmidt will assume the role of Executive Chairman, and continue to serve as an advisor to Page and Brin.

Since the full year report on January 20, GOOG is down by 2.9%. (For our take comparing Google with other tech titans in 2011 on a valuation basis, view the article here.)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.