Kemble, according to this report if Dell does well this quarter that could be bad. Now I am really confused. Good earnings are bad, meeting expectations isn't good enough and lower earnings are bad. Does anyone think this is being manipulated?
BOSTON -(Dow Jones)- The top U.S. computer makers are expected to report mixed third-quarter earnings amid nagging fears about year-2000 spending, supply problems related to the Taiwan earthquake and intense price competition, analysts said Tuesday.
Investors are watching closely for any Y2K effects in the just-ended quarter. Don Young, an analyst at PaineWebber Inc., said the September quarter could actually spook investors if results are too strong because the surge would suggest that corporations have been ratcheting up their computer spending in advance of Y2K. That, said Young, would be a harbinger for sharp cutbacks in the fourth quarter and into next year.
Analysts believe revenues at International Business Machines Corp. (IBM) and Hewlett-Packard Co. (HWP) could fall short of expectations. Compaq Computer Corp.'s (CPQ) earnings are expected to slip amid fierce personal computer competition.
The bright spot is expected to come from Sun Microsystems Inc. (SUNW). Powered by its strong business with Internet-related companies, analysts believe Sun is poised to beat expectations. "Sun is now viewed as the Microsoft of the Internet," Young says.
Gary Helmig, an analyst with SoundView Technology Group, says investors are skittish about IBM because Savoir Technology Group Inc. (SVTG), which distributes IBM's AS/400 mid-range server, recently warned of disappointing third-quarter earnings. Some analysts are also expecting a slowdown in IBM's rip-roaring computer-services business because of concerns that corporations are deferring projects until after Dec. 31.
Helmig says he has already adjusted his projections downward and isn't worried about the quarter. Noting that the AS/400 represents less than 5% of IBM's revenue, he says fears are overblown. And he says many of IBM's contracts are "annuities" for essential services, such as maintenance, which won't be affected.
Helmig estimates that IBM will report $21.5 billion in third-quarter revenue, up 7% from last year's $20.1 billion. He says his 1999 figure is "a couple of hundred million" less than most analysts expect. Net
income should increase 13% to $1.69 billion, or 90 cents a share, from $1.49 billion, or 78 cents, in the year-ago period.
H-P has already braced investors for some glitches. Its new chief executive, Carly Fiorina, warned that earnings may suffer in the company's fiscal fourth-quarter, ending Oct. 29. She blamed lower-than-expected U.S. sales of computer servers and supply problems resulting from Taiwan's recent earthquake. Those problems, Fiorina said, could cause H-P's revenue growth for the quarter to come in at the low end of its earlier expectations, closer to 10% than 13%.
At the same time, Fiorina unveiled a reorganization of H-P's business structure, to shuffle the responsibilities of her four immediate subordinates and to shake up the sales force in H-P's server division.
With that backdrop, Steven Milunovich, analyst with Merrill Lynch, isn't expecting a spectacular October quarter. He is looking for revenue of $11.27 billion in the quarter, up 10% from $10.25 billion in the same period last year. He is projecting net income will rise 10% to $818 million, or 78 cents per share, from $746 million, or 70 cents, in the year-ago period. (Both sets of figures are adjusted to
account for the expected spin-off of Agilent Technologies Inc., H-P's test-and-measurement business.)
PaineWebber's Young says the third quarter should be another rocky one for Compaq. The company continues to struggle amid competition from IBM and Dell Computer Corp. (DELL). And Compaq is suffering from delays in the introduction of a high-end server.
On the bright side, however, analysts believe Compaq seems to have been able to retain most of its market share in the U.S. - though at the expense of its profit margins. Young projects that Compaq will
report third-quarter revenue of $9.52 billion, up 8% from $8.79 billion in the same period last year. Net income should fall 21% to $91 million, or five cents a share, from $115 million, or seven cents, last year.
Meanwhile, John B. Jones Jr., an analyst with Salomon Smith Barney, marvels at Sun Microsystems' knack at connecting with its customers. The server specialist is winning more than its fair share of Internet sales, in large part because of its early position as a leader in the marketplace.
In Sun's fiscal first quarter, ended Sept. 30, Jones expects revenue of $3 billion, up 20% from $2.49 billion last year. Net income should more than double, to $256 million, or 31 cents a share, from $114
million, or 14 cents a share. Last year's figure included an acquisition-related charge; without the charge, net income would have hit $197 million, or 25 cents a share. And, Jones says, "there may be
some upside to those numbers." |
