Today: Alcoa kicks off earnings season, but Advanced Micro Designs issues a scary note for tech companies as Wall Street falls. Also: Two IPOs receive initial pricing ranges as public debuts begin to return, and possible Facebook-LinkedIn battles have opposite effects on the two companies.
Earnings season could be bad, especially for technology companies
Earnings season began after the markets closed, and one of the biggest drivers for Wall Street movement had an inauspicious debut with an expected result and an unexpected announcement from Silicon Valley.
Trading was light Monday as traders awaited the traditional kickoff of earnings season, the report from aluminum company Alcoa, the first of the blue-chip Dow Jones index components to announce results each quarter. As expected, the company gave a poor report, feeding into predictions from experts that the poor global economy would drag on companies' earnings in the second quarter.
Alcoa announced that it lost money in the second quarter, with a net loss of $2 million on revenue of $5.96 billion, a 9 percent drop in revenue from the previous quarter. After extracting one-time items, Alcoa earned 6 cents a share, barely beating analyst's low expectations of 5 cents per share on revenues of $5.83 billion, according to FactSet.
Earnings are expected to fall 1 percent year-over-year as a group
"We expect the tone of earnings season to be quite negative," Jonathan Golub, chief strategist at UBS in New York, told Reuters.
The shocker for the day was not Alcoa's earnings but a statement from Sunnyvale chipmaker Advanced Micro Devices, which announced that its earnings will be far below original projections, living up to fears that economic problems in Europe and Asia would hurt tech spending.
AMD announced that second-quarter earnings -- which it had originally projected to rise by 3 percent from the previous quarter -- would fall 11 percent as sales to China and Europe weakened. The company lost $590 million in the first quarter, so a poorer second quarter could severely hurt the semiconductor company.
The announcement immediately assaulted AMD's stock price, which descended more than 9 percent in after-hours trading by 3 p.m. Pacific time.
The larger concern would be if investors believe this same effect was felt throughout the technology sector, which could lead to a sell-off of tech stocks in Tuesday trading. JMP Securities analyst Alex Gauna told Reuters that AMD's ills are more company-specific than industrywide, however.
Intel was affected only slightly by AMD's announcement, as it fell more than 1 percent in after-hours trading, but it could have offset any dangers by announcing at the same time that it had committed $4.1 billion to a partnership with Dutch company ASML to research the next generation of microchips. Santa Clara-based Nvidia fell 1.4 percent in after-hours trading.
Initial public offerings back in style after 'Facebook freeze'
While tech stocks face doubts, future tech stocks seem to be getting back on track after Facebook's bungled debut caused many to delay their plans for initial public offerings. After only four companies went public in June -- the lowest monthly total since 2008, according to PrivCo -- two tech companies established an initial pricing range Monday.
Santa Clara-based Palo Alto Networks, which makes computer firewall and security software, plans to charge $34 to $37 a share in its IPO, according to Monday's filing, bringing in up to $229.4 million. The company will take home 75.8 percent of the proceeds, with the rest going to early investors.
Kayak Software, a Connecticut-based company that runs a popular consumer travel website by the same name, plans to price its IPO stock from $22 to $25 a share while offering 3.5 million shares, all from the company, for a possible total take of up to $87.5 million, according to its filing with the Securities and Exchange Commission.
Palo Alto Networks fits the profile of companies that have succeeded in the IPO market of late -- offering cloud-based software of need to big businesses, similar to companies such as Jive Software, Splunk, Infoblox and Proofpoint. The only large tech IPO since Facebook went public May 18 was a similar company, San Diego-based ServiceNow, and its stock priced above the initial range and then jumped 37 percent on its first day on the market, June 28.
"ServiceNow shows that the appetite for fast growing tech companies in their growth cycle will be massive. I expect there to be good demand for Palo Alto," Morningstar analyst Jim Krapfel told Reuters.
Kayak has a longer history of profitability -- net gains in three straight fiscal years, while Palo Alto Networks is only now heading for its first yearly gain -- and can point to Wall Street strength of competitors Priceline and Expedia, which have risen fast since the beginning of 2009.
Both stocks are expected to finish their roadshows and set their final share prices by July 19.
Facebook, LinkedIn diverge after report of Facebook jobs board
Two of Silicon Valley's social-media titans headed in opposite directions Monday on Wall Street, possibly because one of them is headed down the other's path.
After a report late Friday said Facebook was planning to launch a new jobs board, LinkedIn slid 5.4 percent Monday, while Facebook was one of the few tech stocks to advance, with a 1.4 percent gain.
While investors obviously believed the move would hurt LinkedIn, analysts weren't so sure. JP Morgan analyst Doug Anmuth wrote Monday morning that his firm does "not view it as a material threat to LinkedIn and we would view any material weakness as a good buying opportunity."
Topeka Capitol Markets analyst also do not believe the move will be of great consequence, reporting that "several Facebook users we polled indicated a preference to keep their online social networking and professional networking activities completely separate, suggesting to us that LinkedIn could remain insulated near-term by actions by Facebook in this area."
Other social-media stocks declined Monday, though not as much as LinkedIn: Zynga slid 2.2 percent and Yelp fell 2 percent.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Down 5.56, or 0.19 percent, to 2,931.77
The blue chip Dow Jones industrial average: Down 36.18, or 0.28 percent, to 12,736.29
And the widely watched Standard & Poor's 500 index: Down 2.22, or 0.16 percent, to 1,352.46
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.