June 29, 2012, 4:34 PM — Tech stocks are ending the first half of the year on an upbeat note with news that enterprise spending on software lately has been relatively strong.
On Friday shares of computer companies led a U.S. market rally in the wake of reports that European nations are formulating a plan to create a single banking supervisor.
The tech-heavy Nasdaq soared by 2.89 percent Friday afternoon. Nasdaq computer stocks were up 3.32 percent in aggregate, as four of the five most active stocks on the exchange were tech companies. Qualcomm was up US$1.24 to $55.54, Microsoft rose $0.66 to $30.57 and Cisco jumped $0.56 to $17.04. Of the most active tech stocks, only Research In Motion declined, slumping $1.66 to $7.48.
The immediate reason for the market surge, which affected most sectors, was news coming from Europe about strides being made to resolve the crisis in the euro zone, caused by the debt crisis afflicting southern European nations, especially Spain and Greece. A plan reportedly being discussed in the E.U. would allow lenders to be recapitalized directly with bailout funds once Europe sets up a single banking supervisor. The plan also calls for the European Central Bank to have the ability to buy sovereign bonds in both the primary and the secondary markets. A growth package of €120 billion was also announced.
The plan, if it comes through, would help lift a pall over U.S. tech companies. Major U.S. tech vendors derive a significant portion of revenue from Europe.
Quarterly earnings reports from U.S. software companies have also helped inject some optimism into the tech market, however.
Last week, Oracle said that for the quarter ending May 31 net income rose year over year by 8 percent to $3.5 billion, while revenue increased by 1 percent to $10.9 billion. Red Hat said quarterly revenue was $314.7 million, up 19 percent year over year. Net income for the quarter was $37.5 million, compared with $32.5 million for the year-earlier period.
This week, Tibco followed with more good news for enterprise software, reporting Thursday that record second-quarter total revenue was $247.4 million, up 14 percent year over year and up 20 percent on a constant currency basis. Net income was $26.5 million compared to net income of $21.0 million a year earlier.
Though the European debt crisis weighs heavily on the tech market in general, enterprise software vendors that have been doing well of late say that with the right value proposition, tech companies can close deals.