INTC ($33)....Theme of Tech Earnings: 'Could Be Worse'
By Duncan Martell
SAN FRANCISCO (Reuters) - If you had to pick a theme for the latest week of corporate earnings reports from New Economy technology stalwarts, you might say ``Well, it could have been worse.''
Such high-tech heavyweights as Microsoft Corp.(NasdaqNM:MSFT - news), International Business Machines Corp.(NYSE:IBM - news) and data-storage company EMC Corp.(NYSE:EMC - news) all reported quarterly earnings that met or exceeded analyst forecasts.
But those same companies were a bit cautious about the first half of 2001, joining many non-high-technology companies that are concerned a slowing economy could crimp profit and sales growth. Demand for personal computers, for example, remains weak and if the economy slows dramatically, this would prompt companies to pare information technology budgets.
Microsoft ``has a cautiously optimistic outlook, setting the improving trends of its emerging enterprise business against the continued slow growth of desktop applications, in particular,'' is how Merrill Lynch analyst Chris Shilakes characterized the software giant's second-quarter results and outlook.
Many high-tech firms -- Microsoft and chipmaker Intel Corp.(NasdaqNM:INTC - news), among others -- had warned about earnings for the calendar fourth quarter. So when they actually did report results, investors were not expecting any pleasant surprises.
All eyes instead were on company executives' thoughts on business conditions in the first quarter and first half of the year.
Nasdaq Gains For The Week
For the most part, investors liked what they saw, sending the Nasdaq higher in the holiday-shortened week by 5.5 percent. It rose on Friday by 1.89, or 0.1 percent to 2770.38, its second straight winning week and the first such one since September.
Next week brings more earnings reports. Chipmaker Texas Instruments Inc.(NYSE:TXN - news), the biggest maker of digital signal processor chips used in cell phones and other devices, reports fourth-quarter earnings on Monday. Analysts expect per-share earnings of 33 cents a share, a 27 percent increase over the 26 cents a share in the year-ago period.
Specialty chipmaker Vitesse Semiconductor Corp.(NasdaqNM:VTSS - news) reports fiscal first quarter earnings also on Monday and is forecast to earn 24 cents a share, more than double the 11 cents a year ago.
Tuesday brings communications chipmaker Broadcom Corp.(NasdaqNM:BRCM - news) and its fourth-quarter earnings, expected to be 31 cents a share, nearly double the 16 cents it earned in the year-ago period.
No. 1 PC maker Compaq Computer Corp.(NYSE:CPQ - news) reports fourth-quarter earnings on Tuesday, with earnings forecast to be 28 cents a share, 47 percent higher than the 19 cents it earned per share in the year-ago period.
Custom chipmaker LSI Logic Corp.(NYSE:LSI - news) also reports its fourth-quarter results on Tuesday and is expected to earn 34 cents a share, up 42 percent from 24 cents a year ago.
Lucent Technologies Inc.(NYSE:LU - news), Broadvision Inc.(NasdaqNM:BVSN - news) and Qualcomm Inc.(NasdaqNM:QCOM - news) also report quarterly results this week.
NOT GOOD ENOUGH?
Some companies that reported last week disappointed investors. Shares of network computer maker Sun Microsystems Inc.(NasdaqNM:SUNW - news) took their biggest one-day slide in over a month on Friday after the company cut its sales forecast for the current fiscal year. This left investors questioning Sun's high valuation and growth potential.
The stock dipped $4, or 11 percent, to $30-7/8 on the Nasdaq on Friday. ``The short-term doesn't look great and there appears to be no catalyst for upside appreciation; longer-term, some structural challenges exist, and the stock isn't compelling from a valuation basis,'' Sanford Bernstein analyst Toni Sacconaghi wrote in a note.
Sun could be the victim of previous success. As competitors such as IBM and Hewlett-Packard Co.(NYSE:HWP - news) reported far lower sales growth rates, Sun racked up a 44 percent sales increase in the quarter, to $5.12 billion from $3.55 billion.
But that was off the whopping 60 percent year-over-year growth that Sun had seen in its first quarter.
Chipmaker Intel had even grimmer news, forecasting first-quarter sales would fall about 15 percent from the $8.7 billion it had in the fourth quarter.
That drop is much larger than the more historical drop of 5 percent from the fourth quarter. The first quarter is typically the PC industry's slowest.
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