Microsoft reported solid earnings earlier today, sending shares more than 7% higher in early trading. Although sales were down more than 14% compared to last year and net profits fell more than 18%, investors were encouraged by strong early results for Windows 7 (which created $1.5 billion in deferred revenue from customers who bought a Windows Upgrade Option and to retailers who bought the new product). Microsoft also announced that the company will restart its share repurchase program, buying back over $1.4 billion this quarter after not buying any back the past two quarters. This comes as good news to Microsoft investors as the computer giant increased its cash reserves to a staggering $36.7 billion.
Meanwhile, Amazon.com posted an excellent quarter in which they reported a 69% increase in third quarter profit. This helped push earnings dramatically higher, as analysts were expecting earnings of 33 cents a share and instead received earnings of 45 cents a share from the online retail giant. Amazon also reported strong sales of their Kindle book reader, the company’s best selling product. This positive news, as well as a good holiday outlook, sent shares soaring up more than 22% to a new all time high.
This news has pushed several technology ETFs higher, including Merrill Lynch’s Internet HOLDR (HHH), PowerShares’ Nasdaq Internet Portfolio ETF (PNQI) and First Trust’s Dow Jones Internet Index Fund (FDN), all of which were up more than 1% in early trading. HHH, which has more than 30% of its holdings in Amazon, was up about 6%.
FDN has a 6.5% holding in Amazon, while PNQI has about 7.5%. The Microsoft-heavy Merrill Lynch Software HOLDR (SWH), which has about 20% of its assets in MSFT, was about even in late morning trading.
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Disclosure: No positions at time of writing.