By Scott Moritz

IBM (IBM) sounded a rally cry for tech as the big IT shop blew past its first quarter targets.

Big Blue roundly beat the Street’s adjusted profit expectations by 20 cents with a $1.65 bottom line for the first quarter. Sales of $24.5 billion also soared passed analysts’ estimates, which called for revenue of $23.7 billion in the quarter ended last month.

The news follows Intel’s (INTC) solid first quarter performance Tuesday and highlights some of the favorable trends still at work in the sector, especially among the bigger players.

The strong performance by IBM will help assure economy watchers and investors that the gloom hanging over the market may be lifting in some segments of the tech world.

While IBM didn’t give an immediate forecast, CEO Sam Palmisano gave an upbeat appraisal in a press release Wednesday, saying “We feel good about the rest of the year.”

The sunny outlook will likely spur a sense of optimism on Wall Street where sentiments ran high Wednesday after JPMorgan Chase (JPM) reported solid results. The Dow Jones index was up 2% and the tech-laden Nasdaq rose nearly 3% Wednesday.

By Michal Lev-Ram

Online auctioneer eBay reported first-quarter earnings that beat analysts’ estimates Wednesday, citing strong growth in classified listings, expansion at PayPal and Skype and the company’s global business.

The San Jose, Calif.-based company said revenues rose 24% to $2.19 billion, up from $1.8 billion in the same period last year, and beating Wall Street’s expectations of $2.08 billion.

eBay’s (EBAY) net income came in at $460 million, or 34 cents a share, in the first quarter, up 22% from a year ago. Excluding certain one-time charges, profits rose to $562 million, or 42 cents a share, above analysts’ consensus estimates of 39 cents per share.

“This was a very strong financial quarter for the company,” said new eBay chief executive John Donahoe, who took over in March after longtime CEO Meg Whitman stepped down. “The results reflect the strength provided by our diverse portfolio of businesses.”

Shares of eBay were largely unchanged after-hours. The stock finished the day up nearly 2% in regular trading on the Nasdaq.

“It was a case of they beat the numbers but it was anticipated,” said Piper Jaffray analyst Aaron Kessler.

Last January, eBay’s stock took a hit after its guidance fell below Wall Street’s estimates. And in February, eBay outraged some sellers when it reduced listing fees but increased the amount of money it takes out of each sale.

On a call with investors following Wednesday’s earnings release, eBay CEO Donahoe said he’s already seeing some positive momentum as a result of the restructured fee model.

“It’s only been about six weeks since the changes we announced have gone into place, but in both the U.S. and the U.K. we’re encouraged by the results we’re seeing,” said Donahoe.

According to the company, the number of listings on the site in the first quarter grew 10% from the prior year.

But the growth rate of the company’s gross merchandise volume, or the total dollar amount for items sold, is down, coming in at $16.04 billion — an increase of 12% over the first quarter of 2007 but down from the 14% growth seen in last year’s first quarter.

“Sustained GMV [gross merchandise volume] growth acceleration in eBay’s core U.S., UK and German markets is key, we believe, to the company’s fundamentals and stock price,” Citigroup analyst Mark Mahaney said in a written report.

The growth rate of active eBay users is also down, coming in at 1% compared to 10% in the year-ago quarter. And according to a recent Nielsen Online report, Web traffic to eBay decreased three percent year-over-year.

New CEO Donahoe told investors that 2008 would be a year of “bold changes” for eBay. His three top priorities are making the company’s sites easier and safer to use, improving pricing and incentives and growing PayPal, an eBay subsidiary.

But, as the company’s CFO Bob Swan conceded, there’s still a lot of work to be done.

“For the remainder of 2008 we’ll continue to focus on the strategies we’ve put into motion,” Swan said in a written release.

For the second quarter, the company says it expects revenues in the range of $2.1 billion to $2.15 billion, roughly in line with current estimates of $2.11 billion. Profits, excluding charges, are expected to come in at 39 cents to 41 cents per share, also in line with analysts’ forecasts of 40 cents per share.

By Yi-Wyn Yen

Google’s shares have lost a third of their value since the start of the year, and concern is growing whether the small text ads Google serves are partly to blame. That will be one of the top things Wall Street will pay attention to when Google (GOOG) reports earnings Thursday after the close of trading.

“Revenue growth and paid clicks. That is what is on everyone’s minds,” says Imran Khan, an Internet analyst with J.P. Morgan.

In late February, comScore released a controversial report that had many analysts convinced that Google was not immune to a recession. The comScore report suggested that Internet users in the United States were clicking on Google ads less frequently. Some analysts began slashing their price target on Google, which gets 97% of its revenues from online ads, after the report showed that Google’s ‘paid clicks’ were flat in both January and February from the same period a year ago.

Tuesday evening comScore issued its latest report that showed Google’s paid clicks grew 3% in March year-over-year. But this time, analysts remain more cautious of the comScore’s numbers and warned investors against reading too much into the data. “We…believe that it is most useful for spotting trends,” wrote UBS analyst Ben Schachter in a report.

Is the slowing growth of Google’s paid clicks due to a weaker economy or because the company is actively managing the volume of its own ads? Google, which does not give forecasts for future performance, has said it is the latter and it is working on weeding out the poor quality clicks.

If that is the case, Google will still have to prove that its quality control initiatives translated into higher-revenue growth for the first quarter. Google believes that by placing fewer ads, it will be able to charge higher rates per ad.

Schachter is skeptical that the revenue generated by fewer, higher-quality ads will make up the difference. “Google may have made some pricing improvements, but we don’t believe they will be enough,” he wrote.

“We simply disagree with the notion that pricing out the lower quality advertisers will somehow result in higher quality advertisers paying higher rates in the near-term,” he added.

Besides paid click revenue, there will be plenty of other topics to discuss about Google’s first quarter. In an effort to push for open standards among mobile operators, Google entered the 700 MHz spectrum auction. In the second half of the year, Taiwanese manufacturer HTC is set to release a handset that uses Android, Google’s own mobile operating system.

The search giant also closed its $3.1 billion acquisition of DoubleClick, the industry’s top ad server. Analysts will also pay particularly close attention to Google’s integration plans for DoubleClick. In April, Google laid off a quarter of DoubleClick’s 1,200 U.S. employees.

The DoubleClick deal is largely seen as a way for Google to grow its display advertising potential. Wrote Citi analyst Mark Mahaney, “We believe that traction with the DoubleClick deal – along with mobile Internet and YouTube monetization progress – can provide material stock catalysts” for the second half of 2008 and first half of 2009.

By Scott Moritz

Google (GOOG) is sitting squarely in a troubling three-month slowing trend, and only some deft moves can spare the search giant from an apparent first-quarter shortfall.

ComScore numbers once again confirmed that people are searching less and clicking on advertisements at a much slower rate as the economy tanks and consumer spending pulls back. In March, Google’s paid clicks grew 2.7% over year-ago levels putting first-quarter paid click growth at 1.8%, a big slowdown from the 25% rate in the previous quarter and well below the 48% pace in the third quarter.

When your revenue engine is almost entirely fueled by Internet searches and ads clicks, it’s probably wise to watch your gauges. Analysts’ estimates for Google’s first quarter have been cut sharply ever since this trend was first spotted in January. But Google fans say the company has been honing its search efficiency and raising prices to offset the slump.

Additionally, some analyst point to Google’s ability to increase its U.S. market share to 55% in March from 53% at the beginning of the year.

Google reports earnings after the market closes Thursday. Analysts are looking for adjusted earnings of $4.52 a share on sales of $3.61 billion in the first quarter ended last month. That calls for a top line growth rate of 42% over last year’s revenue level.

If the company made adjustments, the chances of disappointing Wall Street will be limited. But if ComScore’s numbers are any indication, writes Henry Blodget of Silicon Alley Insider, Google “will miss by a mile.”

By Scott Moritz and Michal Lev-Ram

A solid performance from Nokia (NOK) could be the prescription to elevate the warning-weary mood in the tech sector.

The No.1 mobile phone maker is due to report first-quarter results early Thursday, kicking off the hotly anticipated wireless industry earnings parade. Among the players are No.3 phone shop Motorola (MOT), Verizon Wireless (VZ), Apple (AAPL), AT&T (T) and Sprint (S).

Unlike the worries surrounding other big tech names like Cisco and Google, Nokia’s global reach and the booming worldwide demand for wireless devices gives analysts and investors a bit of confidence that the big Finnish phone titan will hit its targets.

“People are nervous about it but I don’t foresee a big variance” from Wall Street estimates, says one analyst, who asked not to be named.

Here are some of the key numbers to look for on the score sheet. Analysts’ consensus estimates call for Nokia to have sold about 115.5 million phones, booking an adjusted profit of 57 cents (36 Euro cents) on $20 billion (12.7 billion Euros) in sales for the quarter ended last month.

Nokia usually doesn’t provide detailed financial forecasts, but there will probably be some lively discussion about the immediate and the long-range business outlook.

“Nokia may reiterate the market growth rate of 10% and its intentions to grow faster than the market as it makes a bigger push into the U.S.,” writes RBC analyst Mark Sue in a preview report Tuesday. “Near term, Nokia is enjoying rapid growth in Africa, strong trends in India and China, and inline contributions from Europe,” Sue continued.

Nokia had 38% of the world’s cell phone market at the end of last year and it edges closer every day to a 40% slice of that sweet cake.

While mighty Nokia isn’t completely immune to economic downturns, it has a secret weapon that other phone makers don’t: a dominant presence in faster-growing developing markets.

Last year, 56% of Nokia’s net sales came from Asia, Latin America, the Middle East and Africa, while Europe and the U.S. accounted for 39% and 5%, respectively. This quarter, that gap will probably widen even more, with the volume of handsets sold in developing regions growing at a much faster pace than in more mature markets.

Nokia’s limited exposure to the U.S. reduces near-term risks and offers an opportunity for share gains through 2008, Oppenheimer analyst Ittai Kidron said in a recent report. “Its strong position in the low end and emerging markets, the market’s strongest growth regions, offers upside,” says Kidron.

To help retain its “strong position,” Nokia has developed a wide range of inexpensive phones for countries like India, where millions of people buy their first handset each month. Earlier this month the company came out with four new entry-level devices, including the Nokia 1680 “classic” — its cheapest cameraphone yet at about $80. The company hopes that, as consumers in these countries upgrade, they’ll keep buying Nokia.

That doesn’t mean that Europe and the United States – where there’s more of an appetite for pricey multimedia devices with large profit margins – aren’t important markets for Nokia. While Nokia sells a much higher volume of phones in emerging markets, Europe is still its single most profit- and revenue-generating region.

Some analysts worry that Nokia’s NSeries of multimedia devices is stale, and the company is long overdue to introduce an iPhone competitor. Rivals LG, Samsung and Sony Ericsson all unveiled touchscreen phones at the CTIA wireless trade show earlier this month.

One thing’s for sure – it will take a lot of cheap handsets to make up for slowing growth on the mid- and high-end market.

And that just the solid act people are looking for.

“I think we will see that the macro economic slowdown didn’t cause them to miss,” says one money manager who holds Nokia stock. “And bottom line, Nokia will show that it’s still the dominant force in handsets.”