Hopes Abound for High-Tech Revival
Peter Morton
Financial Post
Wednesday, August 29
Three of the global leaders in the turbulent technology sector say the worst may be behind them, bringing hope that the high-tech industry may again drive the U.S. economy.
Intel Corp. [INTC], Texas Instruments Inc. [TXN] and Xerox Corp. [XRX] all said yesterday they expect to see a stronger second-half sales in personal computers and wireless telephones.
The once booming tech sector led the U.S. economy to near recession levels beginning late last year and has remained in poor shape throughout the first half of the year. However, economists see an improvement that may be a harbinger for better economic times soon. "Since the [fundamentals] of the economy are sound, I would say an improvement in the technology sector is an indicator of how things could turn around in the future," said Oscar Gonzalez, a senior economist at John Hancock Financial Services Inc. in Boston.
Mr. Gonzalez said that if much of the sector joins the optimism of Intel, Texas Instruments and Xerox, there could be "a fairly quick and strong rebound."
Paul Otellini, general manager of Intel Architecture Group, was cautiously optimistic about the second half of the year for the world's largest manufacturer of personal computer microchips.
"Anything has to be better than the first half," he said during the company's semi-annual development conference. "It is still a seasonal second half."
Mr. Otellini said while demand varies around the world, the current weaknesses remain in the more developed markets. "Much of what we see is localized to the United States and Europe," he said. "China and India are on track for record results this year."
Texas Instruments, which makes chips for two-thirds of the world's mobile phones, said it sees the first signs of a rebound in global demand for handsets as phonemakers place orders for equipment.
Richard Templeton, the company's COO, said it expects a second half rebound after major wireless telephone makers such as Nokia Oyj [NOK] began placing orders.
"We see resumed ordering demand from some of our customers because they've got an ability to ship more product into the marketplace," he said.
Both Nokia and Motorola Inc. [MOT] expect to see stronger sales in the second half of the year. Xerox, which had been plagued by accounting problems, slumping sales and increased competition, predicts it will earn a profit during the final three months of the year.
In late July, the company posted a US$281-million second-quarter loss -- its fifth in a row. Analysts expect the company to post fourth-quarter earnings of between US10¢ and US18¢ with a consensus estimate of US13¢, according to First Call/Thomson Financial.
"We are committed to returning to profitability in the fourth quarter and building on that positive momentum into 2002," Anne Mulcahy, the company's chief executive, said at a shareholders meeting in Stanford, Conn.
The world's largest software manufacturer predicted a rosier future for the troubled industry.
"The timing is incredibly good for the PC industry," Jim Allchin, vice-president of Microsoft's [MSFT] platforms group, told developers during a preview of XP Windows operating software being launched on Oct. 25, timed to a 2 gigahertz Pentium chip shipped by Intel.
"We should have a very good next year," he said. "And when I say we, I mean the industry."
However, San Diego computer maker Gateway Inc. [GTW] said last night it will cut about 25% of its workforce and take a US$475-million third-quarter charge. |
