The Nasdaq has risen 19% in the quarter that is about to end. That is much more than the S&P 500, which is only 13% higher. Many analysts believe that the Nasdaq has risen too far, too fast. That may not be the case at all.
Experts on the markets point out Apple’s (NASDAQ: AAPL) impressive share increase has driven the Nasdaq’s success. (Apple’s shares are up 50% this quarter.) Based on its market cap, that is fairly true. However, a number of other tech companies in the enterprise, consumer and Internet businesses have done almost as well as Apple, and in some cases better. The consumer’s appetite for electronics does not appear to have faded, nor has the trend of companies replacing old technology with new. And consumer and business confidence continue to rise, for the most part.
The best bellwether for the enterprise software industry is Oracle (NASDAQ: ORCL), the world’s largest company in the sector. Its most recent earnings figures were unexpectedly strong. Oracle’s stock is up 15% in the first quarter. The other large marker of the enterprise part of the tech world is Cisco Systems (NASDAQ: CSCO). Its shares are up more than 16%.
If consumer activity is measured by the purchase of PCs, then that sector will continue to be a drag on the Nasdaq. The shares of Hewlett-Packard (NYSE: HPQ) and Dell (NASDAQ: DELL) have continued to struggle. The age of the PC may be over, or at least the hardware has been replaced by tablets and smartphones. HP and Dell have tried to diversity into business services, but this has not offset their personal computer difficulties.
A better indicator for consumer activity, and also business sales to some extent, is Microsoft (NASDAQ: MSFT). Its shares are higher by 25% this quarter after nearly a decade of languishing. Windows sales are unusually strong, even as the demand for Windows 7 and the company’s mobile OS have been slack. But its gaming division has done well, as have sales in its server division.
The best proxy for Internet company success or failure is Google (NASDAQ: GOOG), which has been the case for several years. Google’s shares are flat for the quarter, but shares of newcomer LinkedIn (NYSE: LNKD) are up by 60%. Zynga’s (NASDAQ: ZNGA) are up 40%. And, sometime in the second quarter, the IPO of Facebook is likely to happen.
The Nasdaq, based on likely tech and Internet demand in the second quarter, should continue to do well.
Douglas A. McIntyre
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