Long term outlook for tech stocks seen good as ever
Reuters Story - March 06, 1998 10:04
%US %ELI %ENT %DPR INTC MOT STM.PA LMEb.ST PHGS V%REUTER P%RTR
By Neil Winton, Science and Technology Correspondent
LONDON, March 6 (Reuters) - Profit warnings from leading
U.S. high technology companies have spooked stock markets around
the world, but analysts said on Friday that although the
short-term outlook may be cloudy, the long-term is as inviting
as ever.
Intel Corp , the world's dominant computer chip
maker, stunned Wall Street on Wednesday with news that its
first-quarter profit would come in below estimates.
Late on Thursday, semiconductor and telecommunications
equipment maker Motorola Inc said its first-quarter
earnings would fall well short of investors' expectations,
because of continued weakness in Asian currencies.
The news from Intel hammered technology stocks around the
world. The Motorola statement added to investor trepidation, but
the impact was less dramatic.
Intel's problems were related more to its own shortcomings
in meeting demand for cheap personal computers, rather than any
worries about the impact from collapsing Asian economies.
Motorola's problems were more closely related to Asia.
Analysts were wary of the short-term implications, but felt
confident that the long-term trade for information technology
companies remained strong.
"This (Asia) is only a temporary problem; we just don't know
how temporary," said Neil Barton, technology analyst at Merrill
Lynch.
Another analyst who declined to be named agreed that Intel's
problems had little to with Asia, more with its perceived and
probably temporary weakness in the market for cheap PCs costing
under $1,000.
"This is really a short-term glitch in high-tech markets
more than anything else. The long-term demand profile looks
healthy," said this analyst.
Stock markets were calmer on Friday, although many
high-profile technology stocks were caught in the Motorola
fallout.
In Paris semiconductor maker SGS-Thomson Microelectronics NV
slid as the overall market rose. In Stockholm Swedish
telecommunications equipment maker LM Ericsson AB
dropped again.
Merrill Lynch's Barton was optimistic for the future, but
wary of possible near-term problems.
How did Merrill Lynch view the prospects for high technology
stocks?
"We've been very cautious as a house and remain very
cautious. There's a lot of uncertainty out there. We don't know
the implications of the Asian situation. We don't know when it
might hit, in the second half of this year or next year," Barton
said.
"This is not an overnight situation. It's obviously
affecting Asia today, but will it effect other places tomorrow?"
said Barton.
Barton said manufacturers like Philips Electronics NV
had already doubled purchases of TV tubes from South
Korea.
"Philips has placed orders worth $300 million (from Korea).
What does that do to workers in Europe? Will there be layoffs?
Factory closures? It's difficult to figure out the
implications," he said.
After Intel's announcement on Wednesday, research companies
were quick to point out that they believed markets remained
strong and current projections would not be scaled back.
Gartner Group's Dataquest said it retained its forecast of
western Europe personal computer sales growth of 14 percent for
1998, slightly down on 1997's 17 percent increase.
CONTEXT said it continues to predict growth of 17.4 percent
for 1998 to 22.9 million, up from 1997's 14.7 percent increase.
Merrill Lynch's Barton agreed with the temporary aberation
thesis.
What were the prospects, say, five year's ahead?
"I'm very optimistic. I've very optimistic about Asia too in
five year's time," Barton said. |
