Tech Results: So Far So Good, Not Out of Woods Yet

By Reuters -  |  Posted 2008-04-21 Email Print this article Print
 
 
 
 
 
 
 

Technology-company earnings have, so far, been holding their own or outperforming. What's to come? 

SAN FRANCISCO (Reuters) - Phew! The first week of the technology earnings season is over, and many are breathing a sigh of relief because, by and large, the numbers and forecasts from some sector heavyweights were not as bad as expected.

Some were even better than that.

Shares of IBM (IBM.N: Quote, Profile, Research), Intel Corp (INTC.O: Quote, Profile, Research) and Google Inc (GOOG.O: Quote, Profile, Research) all rallied after the companies posted results, though plenty of uncertainty remains, and Wall Street estimates for the second quarter may well be taken down another notch.

Intel, the world's largest chipmaker, said its core microprocessor business was "strong" at the moment, and Chief Executive Paul Otellini, who was in Europe two weeks ago, said he saw no red flags either there or at home.

"From an economic standpoint, the two most mature of our markets (Europe and the United States) are not showing any signs of weakness," he said on the company's conference call. "I did not pick up anything."

Google and IBM said much the same thing. "We're well positioned for 2008 and beyond, regardless of the business environment," said the Web search giant's CEO, Eric Schmidt.

"Second-quarter guidance has been fine, and estimates are generally not falling as many feared," said Justin McNichols, a portfolio manager at Osborne Partners Capital Management in San Francisco.

"Entering the first-quarter earnings season, 2008 estimates for the S&P Tech sector .SPLY were for a 6 percent year-over-year increase," he said. "Going into earnings, sentiment was this number was not achievable. Coming out of earnings, it appears at least the first half is achievable."

SHOES COULD DROP

But there are still shoes that could drop. The weaker economy is forcing U.S. consumers to find ways to cut their phone bills, for example, likely limiting profit growth for the likes of AT&T Inc (T.N: Quote, Profile, Research) and Verizon Communications Inc

(VZ.N: Quote, Profile, Research).

Top mobile phone maker Nokia (NOK1V.HE: Quote, Profile, Research)(NOK.N: Quote, Profile, Research) rattled the market on Thursday by partly blaming the U.S. economy for an estimated drop in the global mobile phone market in euro terms in 2008.

"We're not done seeing some more pain, but that just might be in some of the specific end markets," said Henry Asher, president of New York-based money manager Northstar Group. "The consumer has pulled back so sharply."

Market research firm NPD Group on Friday released a study showing that in just two months, the number of consumers who believe the U.S. economy is in or heading toward a recession or slowdown rose to 84 percent from 79 percent.

"Consumers are generally the last to react to economic downturns; they don't want to halt or cut back on spending, but it is clear they're beginning to throttle back," said Marshal Cohen, NPD's chief industry analyst.



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