Today: Silicon Valley's raft of Wednesday earnings reports lead to volatile Thursday trading, with Cisco falling and Applied Materials and SunPower gaining. Also: Facebook advances while expanding gender options, facing advertising lawsuit.
The Lead: Silicon Valley earnings reports lead to stock swings on Wall Street
After a preponderance of quarterly earnings reports from Silicon Valley on Wednesday afternoon, the companies involved experienced volatility in Thursday trading, with the majority swinging positive but the largest tech firm involved, Cisco, heading down.
Cisco's decline was not as gargantuan as the last time the San Jose networking giant announced earnings, when it suffered its worst day on wall Street in three years after warning that difficulties in emerging markets would tamp down sales. Even with that warning, though, investors and analysts were surprised at a 55 percent year-over-year drop in Cisco's profits and an unsettling decline in the company's gross margin, and shares dipped 2.5 percent to $22.27.
"There was some hope that the inflection point in the company's business would happen earlier as opposed to later," Edward Jones analyst Bill Kreher told Bloomberg News. "But now, a return to growth in fiscal '14 seems unlikely."
Still, most analysts found Cisco's numbers to reflect stabilization as CEO John Chambers looks to turn around the company, calming fears of a long-term downturn and leading to a round of notes suggesting the lower price could offer a strong entry point for potential investors, likely helping the company avoid an even larger stock tumble.
"Cisco is clearly in a tough spot but trends are not deteriorating and order trends suggest that an upturn is feasible within a couple of quarters," Nomura Equity Research analyst Stuart Jeffrey wrote. "Expectations seem low and we believe that the next move in estimates is more likely to be up than down, driven by a product refresh cycle that we expect to overpower any structural headwinds."
Other companies that reported Wednesday enjoyed strong gains Thursday on Wall Street. San Jose solar manufacturer SunPower jumped 5 percent to $33.19 after releasing financial information that reflected "a breakout year for the company," according to CEO Tom Werner. A year after losing $144.8 million in the fourth quarter, SunPower reported net income of $22.3 million on revenues of $638.1 million, and predicted even stronger returns in 2014. SunPower's performance, along with the long-awaited opening of the Ivanpah solar power plant on the California-Nevada border -- a joint effort between Oakland's BrightSource Energy, Google and NRG -- advanced a bright view of the solar industry, and San Mateo solar installer SolarCity was one of many solar companies to benefit, gaining 6.2 percent to $75.81 on the day.
Santa Clara semiconductor-equipment company Applied Materials gained 5.4 percent to $18.87 and reached a 52-week intraday high of $19 after reporting quarterly profits of $253 million, or 21 cents a share, on revenues of $2.19 billion. Even before the close of Applied Materials' huge merger with Tokyo Electron, the company produced large year-over-year gains of 39.5 percent for revenues and 644 percent for net income.
Santa Clara graphics-chip company Nvidia hit a 52-week high of $17.46 and closed with a gain of 3.2 percent at $17.36 after reporting year-over-year gains of 24 percent for profits and 9 percent for revenues. "Take-aways were skewed decisively to the positive," B. Riley analyst Craig Ellis wrote; he raised his rating of Nvidia shares to a "Buy" and moved his price target from $14 to $21.
The only Bay Area tech firm to join Cisco in a post-earnings decline was Sunnyvale storage firm NetApp, which dropped 3.5 percent to $41.10 after reporting profits of $192 million, or 55 cents a share, on revenues of $1.61 billion.
SV150 market report: Facebook, Apple, Google boost Silicon Valley tech stocks
Wall Street enjoyed overall gains Thursday, and technology stocks were a big driver, with the tech-heavy Nasdaq topping the three main U.S. indexes in percentage growth and the SV150 index of Silicon Valley's largest tech companies growing by more than 1 percent.
Facebook increased 4.5 percent to $67.33 while making a change to offer more gender choices to users while facing a new legal challenge stemming from its advertising tactics. The Menlo Park company expanded the possible responses to one of its social network's main identification questions, the user's gender, offering more than 50 new options beyond the standard male or female choices. "There's going to be a lot of people for whom this is going to mean nothing, but for the few it does impact, it means the world," Facebook software engineer Brielle Harrison told the Associated Press. Facebook's advertising practices caused headaches for the company again Thursday, however, as a group asked a judge to overturn his approval of a settlement deal between Facebook and litigants upset with its "Sponsored Stories" advertisements, which use its customers' actions on the social network in advertisements to the user's contacts. The fresh challenge contends that the settlement deal violates laws in several states, including California, meant to protect minors from being used in such ads without their parents' permission.
Apple gained 1.6 percent to $544.43 despite possible Apple TV issues stemming from the proposed $45 billion merger of Comcast and Time Warner Cable, the latter of which Apple has reportedly been negotiating a deal for its set-top box. Pundits also questioned if the big-money cable-television deal would have a negative effect on Netflix, which still managed to hit record highs and gain 1.8 percent to $436.55 while securing the final season of the "Star Wars" animated series, "The Clone Wars." Google also hit record highs Thursday, gaining 1.1 percent to $1,199.90 while reducing the amount of information it provides about acquisitions just days after Bloomberg News revealed that the Mountain View Internet company was the world's biggest dealmaker during the past three years. Tesla Motors hit record highs for the second time this week, gaining 2.2 percent to $199.63, and Twitter dropped 0.7 percent to $56.47 as CEO Dick Costolo talked about the San Francisco company's future at a Goldman Sachs event.
Up: SolarCity, Applied Materials, SunPower, Facebook, Workday, SanDisk, Nvidia, Adobe, Salesforce, Tesla, Netflix, Apple, Pandora, Intuit, Hewlett-Packard, Juniper, Yelp, Google, Yahoo, Oracle
Down: NetApp, Cisco, Electronic Arts, Zynga, Twitter, LinkedIn
The SV150 index of Silicon Valley's largest tech companies: Up 18.63, or 1.21 percent, to 1,558.88
The tech-heavy Nasdaq composite index: Up 39.38, or 0.94 percent, to 4,240.67
The blue chip Dow Jones industrial average: Up 63.65, or 0.4 percent, to 16,027.59
And the widely watched Standard & Poor's 500 index: Up 10.57, or 0.58 percent, to 1,829.83
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/jowens510.