Forecast helps dash hopes for quick rebound
By Jon Swartz, USA TODAY
Anyone harboring hopes for a second-half tech turnaround, be advised: The forecast is cloudy.
Software giant Microsoft (MSFT) dimmed hopes Thursday for a second-half rebound when it warned that weak personal computer demand will slow revenue growth in the current quarter.
Its sentiment echoed that of tech bellwether IBM on Wednesday and other tech firms Thursday, including telecom-equipment maker Nortel Networks and struggling PC maker Gateway.
But it was Microsoft that investors were watching most closely. And the dour short-term outlook, delivered after the markets closed, sent its shares down 4.6% in after-hours trading to $69.20. The drag also took down chipmaker Intel and Cisco Systems.
While acknowledging a difficult economic environment, Microsoft executives said they thought the economy might be bottoming out. Sun Microsystems, too, said it expected a stronger second half of 2001, as did No. 1 PC-maker Dell Computer. But Nortel continued to warn that it didn't expect growth in telecom-gear spending until late next year.
"We slid into this slump, and it's going to take longer to work our way out of it," says Brendan Barnicle of Pacific Crest Securities, noting that the current quarter is typically slow for the tech sector.
Despite Microsoft's outlook, Wall Street saw encouraging signs in its fiscal fourth quarter. Microsoft credited strong sales of Windows 2000, Microsoft's flagship computer operating system, for pumping revenue 13%, to $6.58 billion, from a year ago.
For the quarter, Microsoft eked out net income of $66 million, or a penny a share, compared with net income of $2.4 billion, or 44 cents a share, the same quarter last year.
If Microsoft hadn't had to take a $2.6 billion charge against investment losses, its earnings per share would have been about 44 cents — in line with estimates, analysts said. "The June quarter was the worst quarter ever for PC unit shipments, and Microsoft's revenue still grew 13%," Lehman Bros. analyst Mike Stanek says. "Anyone who can sustain double-digit growth in this abysmal environment hit a home run."
The PC and chip industries hope for a boost after Microsoft releases Windows XP, its new operating system, on Oct. 25. New releases from Microsoft typically boost PC sales.
Sun CEO Scott McNealy, while calling the economy unpredictable, said his company nonetheless expects to win market share. Its shares rose 0.8% in after-hours trading to $14.56.
The star of the day was online auctioneer eBay, which remained immune to the Internet meltdown. Its revenue soared 84% year-over-year to $181 million. And it raised expectations for the second half of the year. |
