Top 5 Recent Tech Earnings Among IBD 50; Acme, Aruba Lead

Article By Michael Krey

Here you go, a quick look at the IBD 50 tech companies that had the best earnings in this latest cycle of quarterly financial reports.

Now hold on a second, we realize that word “best” in one of those funny ones. There are many ways to define best in this case (and most cases, in fact).

We’ve taken the easy way out. You decided. What we’re calling best are the companies whose stock prices rose by the highest percentage the first trading day after they reported. (Most companies report after the close, so we’d be looking at the next work day. For companies reporting before the open, we look at trading that same day.)

We’re only looking at companies that had their last earnings report in Jan. or Feb. Alas, a few miss the cycle, some just barely. As our Capital Hill blog points out, Priceline, InterDigital and MercadoLibre report this week.

But most have reported, and here’s their ranking by first-day pops:

1. Acme Packet (APKT). It’s No. 5 on this week’s IBD 50, where it has set up shop for many months now. After reporting its Q4 results late Feb. 1, the stock jumped 20.4% on Feb. 2. Results and Q1 outlook were far above analyst views. And the stock is up more than 8% since, so it was in no danger of falling off the IBD 50 (though it is actually down from No. 4 last week; tough list). It has ranked no lower than No. 30 over the past six months-plus.

Acme sells hardware and software to companies and service providers to enable their IP networks to carry voice, video, instant messages and multimedia over various wireless and, especially, wireline IP (Internet Protocol) networks. It enables such things as VoIP. Businesses are moving from telephone network connections for voice to IP for voice and video, one big trend helping Acme.

2. Aruba Networks (ARUN). It’s No. 12 on the IBD 50. The company late Thursday reported fiscal Q2 results that beat views, as did its outlook for this quarter. Its per-share profit minus items has at least doubled each of the past three quarters, when compared with the year-earlier quarter. So, the stock shot up a mere 17% on Friday. This rise came despite the unexpected resignation of six-year CFO Steffan Tomlinson. It did appear to be a friendly move, as he and CEO Dominic Orr spoke nice on their earnings conference call. But the CFO is leaving March 31, pretty soon, and Aruba is searching for a replacement. Still, the company is seeing big growth for its hardware and software to securely control wireless communications going in and out of corporate networks and data centers. It’s No. 2 in its sector, behind only Cisco Systems (CSCO), the world’s largest network gear company. Aruba shares are at an all-time high.

3. Netflix (NFLX). It’s No. 4 on the IBD 50. Late Jan. 26, the seller of movies streamed to TVs and PCs via the Internet, and DVD movies by mail, said its EPS jumped 55% to 87 cents in Q4. It ended the year with 20 million subscribers, up 63% over the past year. No. 1 U.S. cable TV firm Comcast (CMCSA) is not far ahead, with its 22.8 million subscribers. It raised its Q1 outlook as well, the stock shot up 15.2% on Jan. 27. On Feb. 14, it hit an all-time high of 247.55. That’s up from less than 50 in January 2010. Needless to say, Netflix is another charter member of the IBD 50. When President Obama met privately on Thursday with a select group of Silicon Valley business movers-and-shakers, sure enough, Netflix CEO Reed Hastings was in the club, along with Apple’s Steve Jobs, Google’s Eric Schmidt, Oracle’s Larry Ellison and others.

4. Open Text (OTEX). It’s No. 44 on the IBD 50, and maybe one of the surprises in this select company. It, naturally for this list, beat expectations when it reported its latest results late Feb. 2, and the stock shot up 10.7% the next day. At one point, it was up 16.9% that day. Still, it ended the day at an all-time closing high, and has since risen another 2.6%. This is another company benefiting from the mobile trend. The Canadian company makes enterprise content management software. ECM software helps enterprises – businesses and other organizations—bring together e-mails, instant messages, documents, videos, images, Web pages and marketing campaigns across an entire work force. And it has a software suite that runs on smart phones on the iPad. ECM is on the rise. Market research firm Gartner says global ECM software sales will rise more than 10% per year through 2014, when it says sales will hit $5.7 billion.

5. ARM Holdings (ARMH). It’s No. 15 on the IBD 50 and, like all of the above except Open Text, has been a longtime regular on our top-stocks list. It reported sterling Q4 results early Feb. 1 and jumped 8.3% that day. And then rose 5.8% the next day, an unusually strong two-day post-earnings run for a stock, especially a stock that has tripled since just late May. But it’s by far the No. 1 designer of chips used in … cell phones. And not just cell phones, but also tablet computers, regular computers, set-top boxes and more. Its licensees include some of the biggest chipmakers, such as Texas Instruments (TXN). Licensees also include some product makers that use some of their own chips, such as a company named Apple (AAPL). ARM’s designs are so strong it’s managed to keep No. 1 chipmaker Intel (INTC) still mostly on the outside in cell phones, despite Intel’s big push into mobile markets.

IBD’s Capital Hill previews the 7 IBD 50 stocks reporting earnings this week.

Check out the entire IBD 50 list (subscription required). If you don’t have a subscription, you can sign up for a free trial and get full access to the IBD 50 and investors.com.

Feb. 14: IBD 50 tech companies with upcoming earnings

Feb. 7: The top 5 networking stocks

Jan. 31: The top 5 chip stocks

Jan. 24: The top 5 China tech stocks

Jan. 18: The top 5 Internet stocks

Jan. 10: The top 5 techs stocks in IBD 50 by market cap

Jan. 3: The top 5 tech stocks in IBD 50 that also finished among the top tech stocks of 2010

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Can Financial Independence be a Viable Option?

Will Your Retirement Savings Meet Your Needs?

Consider these steps to stress-test your retirement kitty’s sustainability.

Current and future retirees have some important advantages over folks who retired even a few decades ago. Due to advances in medicine and healthier lifestyles, a person retiring at age 65 today can and should plan for 20 or more relatively healthy years.

But with improved longevity comes challenges. Given very long time horizons and the fact that the majority of today’s retirees don’t have pensions, the risk of a retiree outliving his or her nest egg is a very real one.

So how can you tell if your retirement portfolio is on the right track to sustain you for the rest of your life? Here are the key steps to take.

1. Estimate income needs.
The first step when gauging your retirement portfolio’s sustainability is to estimate your in-retirement income needs. (This will obviously be easier for those who are closer to retirement than it is for younger savers for whom retirement is 20 or 30 years in the future.)

As you do so, be realistic about what you’ll actually spend. Conventional wisdom had been that retirees will spend about 80% of their pre-retirement expenditures, owing to savings in categories like commuting, lunches out, and not having to save for retirement any more. In reality, some retirees actually spend more than they did when they were working, owing to big-ticket costs like travel and medical bills. Others, meanwhile, spend a lot less.

2. Estimate longevity.
How long does your portfolio need to last? Who knows? But it’s better to plan for a good long life rather than risk falling short and becoming a burden on your loved ones. Use the Social Security Administration’s life-expectancy calculator to find the average life expectancy for someone of your age, or use a longevity calculator such as this one for fine-tuning based on your own health and lifestyle.

3. Gauge certain sources of retirement income.
The next step when determining your retirement portfolio’s viability is to round up any income you’re expecting from sources other than your own retirement savings, including Social Security, part-time work, pensions, and annuities.

For a specific read on what you can expect from Social Security, use the Retirement Estimator calculator on the Social Security Administration’s website. Alternatively, you can submit a request for a personalized Social Security statement using the guidelines outlined here. Bear in mind that the amount of your Social Security income will depend on when you begin collecting; this article lays out some of the key variables.

If your Social Security benefits seem too skimpy, they might be. Not reporting name changes, using a name other than the one on your Social Security card, or entering an incorrect Social Security number can lead to inaccurate benefits calculations. Troubleshoot by checking your benefits every few years.

Projecting what your retirement or pension plan will provide requires more legwork. First, know the factors behind your expected future payments. Defined-benefit plans, such as a pension, often are linked to Social Security payments; consequently, a fatter Social Security benefit could mean a slimmer pension check. Second, be persistent about seeking information. Some plans will update you regularly about your benefits as you near retirement. Others aren’t as accommodating. Pester your employer’s human resources department for more information. If you get the runaround, turn to Washington. Call the Pension and Welfare Benefits Administration (800-998-7542) to find the Department of Labor office in your area. This article provides details on how to check up on the health of a pension.

4. Find the size and asset allocation of your retirement portfolio.
Now it’s time to get a current read on your investment portfolio. Gather up your most recent statements for all of the assets you have earmarked for retirement–IRAs, company retirement plans, and taxable accounts.

Enter each of those holdings into Morningstar’s Instant X-Ray tool. (If you can’t find an exact match for one or more of your holdings, this article details some workarounds.) Take note of your aggregate retirement savings amount (the total dollar value of portfolio), then click Show Instant X-Ray. Jot down how much you have in stocks, bonds, and cash.

5. Determine whether your current portfolio will support your desired level of income.
Armed with these key pieces of information–your expected income needs and longevity, your portfolio size and asset allocation, and your expected income from other sources–you’ll be able to make a reasonable judgment about your portfolio’s sustainability.

This article coaches you on putting all of those variables together and also includes a link to a worksheet that helps you determine if your planned spending rate is reasonable.

For a more precise read on the viability of your retirement calculator, turn to an online tool such as Morningstar’s Asset Allocator and T. Rowe Price’s retirement income calculator. (If you save your portfolio on Morningstar.com, Asset Allocator can use your actual holdings in the calculation.) Just bear in mind that such tools may factor in overly rosy market-return expectations, as I discussed in this article.

6. Make necessary adjustments.
Does your retirement portfolio appear to be on track? If so, give yourself a pat on the back and stick with your savings program; you’re obviously doing something right.

But if it looks likely that you’ll fall short, you’ll have to tweak whatever variables you can–save more, work longer, invest more aggressively, or all of the above. This article discusses some of the key ways in which pre-retirees can improve their portfolios’ longevity if it looks like they’ll run into a shortfall.

About the Author
Christine Benz is Morningstar’s director of personal finance and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances and the Morningstar Guide to Mutual Funds: 5-Star Strategies for Success.

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