There have been a number of noteworthy developments in the technology space recently. They will likely have a material impact on the companies in the sector and the markets they serve.

Some Good News for Netflix (Finally!)

 Shares of Netflix (NFLX) have rebounded somewhat in recent weeks. The company reported impressive revenue growth for the fourth quarter. Netflix added 600,000 unique domestic subscribers during the December period, increasing the total figure to 24.4 million. This reassured investors, following the subscriber losses the company experienced in the third quarter. However, expenses also increased. Earnings per share of $0.73 fell short of the prior-year tally, but exceeded expectations. 

 The stock had declined sharply since last summer, when the company announced a decision to split its streaming and DVD-by-mail services into two separate plans. This move was part of a strategy to place greater emphasis on the company's streaming offerings. However, it increased prices considerably for customers using both services, and drew the ire of both subscribers and investors. DVD membership has declined sharply over the past two quarters, though the weekly rate of cancellations has subsided from the peak levels that were reached in September. Further attrition among DVD members appears likely. On the bright side, the company should further benefit from growth in its streaming business. Efforts to improve content selection, enhance existing offerings, and expand into international markets should remain important. However, costs associated with international expansion, along with a decline in DVD profits, should more than offset the contribution from domestic streaming in the first half of 2012. We envision losses in the first and second quarters, and a modest share deficit for full-year 2012. The company will not launch in additional foreign markets until profitability resumes.

Chalk Another One Up for Apple

Shares of Apple (AAPL) are trading near an all-time high. The company recently reported impressive results for the December period. The top-line advanced over 70% in the recent quarter. Gross margin was much higher than anticipated, and share earnings of $13.87 for the period were well above consensus estimates. The company benefited from stable average selling prices, favorable component pricing, and a shift toward the profitable smartphone category. Apple experienced strong demand for the iPhone 4S. Total iPhone sales (including those of older models) increased roughly 128% from the prior-year period. iPad sales also remained very strong. Looking forward, performance ought to benefit from several factors. Overseas launches for the company's latest iPhone, greater penetration of the enterprise market, and strong demand for the MacBook Air and Pro laptops should all be important performance drivers in the coming quarters. A new version of the iPad should also help Apple to retain its competitive advantage in this product line.

ARM Holdings Reports Strong Results

Britain-based ARM Holdings (ARMH) posted healthy performance in the December period. Revenues and earnings advanced nicely for the quarter. ARM has experienced strong licensing growth, as major semiconductor companies have increased their commitment to its offerings. The company’s chip designs are used in Apple’s iPads. ARM also stated that more new customers have chosen its technology for the first time. In addition, royalty revenues have advanced at a good clip. Several major personal computer manufacturers are reportedly building systems based on ARM’s technology. Microsoft’s upcoming Windows 8 will run on ARM’s chips. The company currently sports a record-high order backlog, and is looking to expand into new markets in the current year.

Nintendo's Woes Continue

Nintendo (NTDOY.PK) has recently reduced its forecast for annual Wii sales from 12 million to 10 million for 2011. The company has also cut its expectation for 3DS sales from 16 million to 14 million. The once high-flying Wii has faced competitive pressure from both Sony (SNE) and Microsoft (MSFT - Free Microsoft Stock Report), which have introduced motion sensor controllers for the PlayStation 3 and Xbox 360. Moreover, Nintendo's handheld devices have faced intense competition from tablet computers and smartphones, which also offer video games. The Japanese company cut prices considerably for the 3DS during 2011. It has also been hurt by an appreciation of the yen, and expects a significant loss for the fiscal year ending in March. Nintendo will look to improve results in the following fiscal year by charging users for downloading additional content and with the release of the Wii's successor, the Wii U, in time for the holiday season.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.