July 20 (Bloomberg) -- Yahoo! Inc., the most-visited Internet site, and Intel Corp., the world's largest semiconductor maker, reported results that disappointed investors, sending the stocks lower and damping expectations for technology earnings.

Yahoo posted second-quarter revenue that missed analysts' estimates and predicted sales this quarter may also fall short. Santa Clara, California-based Intel's profit margins were lower than it had earlier indicated.

The results contrast with a report a day earlier from International Business Machines Corp. that surpassed analysts' estimates and raised expectations for Intel, Yahoo and Motorola Inc. Shares of the three companies rose in trading yesterday in anticipation that they too would beat predictions.

``It's the equivalent of Tiger Woods coming in second or third in a golf tournament,'' said Henry Ellenbogen, who manages $875 million for T. Rowe Price Group in Baltimore. ``The quarter was good but not great.''

Shares of Sunnyvale, California-based Yahoo, which had risen 8.9 percent this month, tumbled $3.77, or 10 percent, to $33.96 in extended trading. Yahoo's report stoked some concern that Google Inc., which reports tomorrow, may disappoint investors. Google shares dropped $6.40 to $303.50 in extended trading.

Intel shares have soared 26 percent in the past three months on optimism that surging demand will propel earnings. The stock, the second-best performer in the Dow Jones Industrial Average, fell $1.26 cents to $27.45 in extended trading.

Shares Fall

Shares of Schaumburg, Illinois-based Motorola fell as much as 95 cents, or 4.8 percent, to $18.90 after the company reported sales that missed analysts' highest estimates. Investors such as U.S. Bancorp's Jane Snorek said stockholders may have expected even more.

``The numbers have to be extremely good to beat investors' expectations these days,'' said Alex Vallecillo, who helps manage $18 billion at National City Investment Management in Cleveland, Ohio. ``As stock prices go up, expectations go up and that raises the risk of something like this happening.''

Yahoo yesterday reported second-quarter profit rose more than sixfold as it sold more Web advertising. Excluding sales passed on to other sites, revenue was $875.1 million, missing estimates of $882.7 million. Yahoo had forecast as much as $895 million.

Yahoo forecast sales this quarter, excluding fees paid to other Web sites, of $880 million to $930 million, compared with estimates of $922.4 million from 25 analysts surveyed by Thomson Financial. Yahoo and Google have been capitalizing on the growing market for Internet advertising and the results may signal that growth is slowing.

Rising Expectations

``Expectations increased meaningfully in the last few days'' for Yahoo, Anthony Noto, an analyst at Goldman, Sachs & Co., said in a note to clients.

Intel said second-quarter profit rose 16 percent as demand for laptop chips pushed sales to a record for the period. Investors were concerned that the gross margin of 56.4 percent was narrower than the 57 percent Intel had forecast.

Higher-than-expected sales of cheaper chips for the Xbox video-game console pushed down average selling prices, Intel said. Analysts had expected sales of the more-profitable Centrino laptop chipset to keep profit margins high.

``People were expecting the oxymoronic earnings surprise,'' said Tim Allen, who helps manage $5.8 billion, including Intel shares at Wentworth, Hauser & Violich in Seattle. ``A lot of hot money had piled in over the last few days.''

`Barely Keeping Up'

Intel Chief Financial Officer Andy Bryant said the company is ``barely keeping up'' with demand and forecast revenue will rise to $9.6 billion to $10.2 billion this quarter.

Motorola said yesterday sales from continuing operations rose 17 percent to $8.83 billion, as mobile-phone revenue surged 24 percent. Chief Executive Officer Ed Zander is rolling out sleek designs similar to the Razr phone to win market share.

Net income was $933 million, or 37 cents a share, compared with a loss of $203 million, or 8 cents, a year earlier, when Motorola had tax costs related to spinning off its chip division. Excluding some costs, second-quarter profit was 26 cents a share, beating the average estimate of 25 cents by 33 analysts in a Thomson Financial survey.

``Intel and Motorola falling were really surprising to me,'' said U.S. Bancorp's Snorek, who helps manage $110 billion at the Milwaukee-based firm, including about 9.1 million Motorola shares and 18.1 million shares of Intel. ``I may buy more of them.''

Motorola and Intel's results don't change the fundamental outlook for technology stocks, said Vallecillo at National City.

``I haven't heard anything that changes my opinion,'' Vallecillo said. ``The electronic component economy is relatively good and I feel sanguine about the near term. I don't see any glaring issues but that doesn't mean one won't crop up.''

To contact the reporters on this story: Jonathan Thaw in San Francisco at jthaw@bloomberg.net.; Ian King in San Francisco at ianking@bloomberg.net

Last Updated: July 20, 2005 03:04 EDT