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Intel, Adobe, Oracle see upside

The companies--each leaders in their sectors--rise after posting bullish financial reports, raising hopes that they will see an end to their slumps.

Shares of Oracle, Intel, and Adobe Systems--each leaders in their respective sectors--rose higher today after the companies posted bullish financial reports, raising hope that these companies are seeing an end to their slumps.

Despite the good news, many analysts are concerned about whether these companies can sustain their rebounds, citing increased competition and the slowdown in economic regions such as Asia.

Shares in database software maker Oracle soared more than 15 percent, one day after the company posted a quarterly profit that beat Wall Street's earnings estimates. (See related story)

Oracle reported that its first-quarter per-share earnings, excluding charges, rose to 20 cents from 15 cents a year ago, exceeding Wall Street expectations by four cents. The better-than-expected gain was fueled by a sharp increase in database sales.

The database company, whose stock has traded as high as 40.06 and low as 17.75 during the past 52 weeks, was up 3.375 points to 25.5.

As a result, some investment banks today raised Oracle's ratings. Prudential upgraded the stock to "strong buy" from "accumulate," CIBC Oppenheimer raised its rating to "buy" from "hold," and Merrill Lynch raised its rating to "near-term buy" from "near-term accumulate."

Shares of chip giant Intel jumped 7.43 percent today after the company said yesterday that revenues for its third calendar quarter would be 8 to 10 percent higher than expected due to stronger demand in North America and Europe. (See related story)

Intel stock was up 7.43 points to 84.9375. The stock has traded as high as 99.25 and as low as 65.63 during the past 52 weeks.

Shares of graphic design software maker Adobe rose 4.43 percent after the company announced that its third-quarter earnings would exceed Wall Street's estimate of 35 cents per share by two cents.

Adobe shares, which have traded as high as 52.99 and as low as 23.63 during the past 52 weeks, were up 1.1875 to 28. CIBC Oppenheimer raised its rating on Adobe to "buy" from "hold."

But not all analysts are impressed by the positive earnings reports coming from these industry bellwethers.

Oracle stock chart Despite Oracle's higher earnings and the several upgrades it has received, Everen Securities analyst Tom Hensel lowered his intermediate-term rating on the company to "market performer" from "outperform." Hensel noted that while Oracle's $1.75 billion in revenue matched expectations, the company's application license revenues were disappointing.

He added that, with the competition looming, he would have liked to see better results coming from Oracle's application license business, so that the company could "hedge themselves against the Microsoft threat."

Sands Brothers analyst Aaron Scott noted that Wall Street initially had expected Adobe to post earnings of 51 cents per share but that the company recently guided those expectations down to 35 cents per share. Adobe had expected $1.95 per share for the year end, but lowered that figure to $1.67.

"There isn't much of a rebound for Adobe; they just lowered analysts' expectations a few weeks ago," said Scott. "I think any margin expansion they are going to get is coming from cost cutting and not from the strength of sales of their products."

Scott added that Adobe's gains also will come from a restructuring. The company laid off about 350 people across the board, and divested itself of its Visual Content and DigiText units.

Of the rebounding companies, Intel seems to have the most going for it, despite its exposure to Asia's slowdown in PC sales.

While the July data from the semiconductor industry was abysmal, with revenues approaching 1994 lows, Intel managed to perform well, according to analysts. The question remains whether they can sustain this performance.

"We have to take it one quarter at a time," said Ashok Kumar, an analyst at investment banking firm Piper Jaffray. "What is propelling their demand is North America and Western Europe, which, in aggregate, represent two-thirds of the worldwide PC market."

Kumar warned, however, that fortunes could change for Intel and other companies. "You expect the mature markets [North America and Western Europe] to be the stable pillars, but there are signs of trouble with a third of the world economy either in or approaching a recession," he said.

Intel, for its part, had hedged its position by introducing new lower-end products to diversify its offerings, but Kumar said that there are more questions than answers right now about Intel's outlook going forward, and that the questions are best addressed one quarter at a time.

Intel is an investor in CNET: The Computer Network.