Move Over Wall Street, the Technology Sector is Back

Amidst the crunch crunch due to subprime mortgage woes for investment banks, technology companies seem to be increasing sales by leaps and bounds. In the 10 days alone, we've seen Google and Microsoft beat market expectations on their quarterly results, which has translated into sizeable stock increases of 7.96% and 17.7%, respectively.

Increased on-line advertising, PC sales, video game sales, and general faith in these two large companies have increased investor confidence in the technology industry. All this amidst subprime mortgage woes, which have caused most of the major banks to report tremendous losses (see Merrill Lynch's $8 billion loss a few days ago). Stock Prices of Merrill Lynch, Morgan Stanley, and the Lehman Brothers have all fallen drastically in the last 10 days.As you can, these falls range from -6% to -16%, with Goldman Sachs being slightly above the rest with a -1.21% stock dip (believe it or not, Goldman Sachs actually beat analyst estimates and recorded a great quarter in lieu of the market downfall).

These trends lead me to pose the simple question: Should we, as short-middle range investors, be moving our money into the technology industry and away from the financial industry. I say yes, but that could be because I'm a tech geek.

Microsoft outperforms expectations, Stock Price Jumps!

On October 25th, Microsoft announced their first quarter earnings, notably outperforming the market's expectations. Revenues came in 27% higher than last year at around $13.9 billion, beating Wall Street predictions by approximately $1 billion. Operating Income also saw a big increase of 32%, coming in at $5.9 billion.

This represents a big quarter for Microsoft, and shows that it still has the guns to compete with the likes of Google. After it's earnings call, it's stock price increased by more than 10% in after hours trading, representing it highest stock price since 2001. This is an extremely big win for Microsoft, as its stock has remained relatively stable while its competitors stock prices have been consistently increasing.
Microsoft is represented by the blue line, with it's stock price increasing 45% in the last 6 years, while Yahoo stock has almost doubled, Google's stock has risen 520% since its IPO in August 2004, and Apple's sTock has risen 2500% (thank you Mr. Jobs).

It's high revenue can be attributed to extremely high Halo 3 sales (generating $300 million in revenue this quarter), unexpected Vista Premium sales, increased Vista sales in international markets, and increased PC sales. Microsoft has also cut prices on its popular Xbox 360 console, and has recently bought a small equity stake in Facebook, hoping to increase its ad revenue. In addition, Steve Ballmer announced that Microsoft is ready to acquire 20 companies a year for the next 5 years, looking to expand it's already large empire. With a market cap of $331 billion, it is now almost twice the size of Wal-Mart.

It seems that Microsoft may be back in the game with Google, as it has increased its fiscal year projections for revenue, expecting approximately $59 billion in revenue for the year.