February 2, 2001 1:15pm
You Survived Q4; Now What?
By Joseph C. Panettieri Sm@rt Partner
Think it's tough to survive in the Australian Outback?
Try keeping your company healthy during the IT
spending slowdown. In re cent days, many high-tech
companies have issued chilly financial forecasts for Q1.
But not everyone is in a deep freeze.
Computer Associates, EMC, IBM, Oracle and Siebel
Systems all announced strong financial results in
recent weeks. Nevertheless, the high-tech sector—from
chips to hardware to networking—has had its share of
ugly surprises in recent weeks (see chart, opposite
page).
The only exception is the high-end storage market,
where Compaq Computer, EMC, IBM and other
companies continue to drive revenue through partners
(SP, Jan. 22, p. 28, www.smartpartnermag.com/
issues/index.html).
The networking sector, meanwhile, has been
particularly difficult to track. 3Com says it's readying
layoffs to cut annual costs by $200 million. And former
industry stars like Foundry Networks and Lucent
Technologies are struggling to keep pace with Cisco
Systems, Extreme Networks and Nortel Networks.
Just last week, Lucent announced plans for 10,000
layoffs. The company intends to slash costs by $2
billion, as it strives to get back into the black. Lucent's
layoff bomb landed the same day that Extreme
Networks delivered strong Q2 results.
Still, networking market leaders see slowing sales
growth in the weeks to come. Even Cisco CEO John
Chambers is less bullish than usual. During a financial
conference in Arizona earlier this month, Chambers
said Cisco's current quarter is "a little more
challenging" than expected (SP, Jan. 15, p. 20,
www.smartpartnermag. com/issues). Cisco is slated to
release Q2 results on Feb. 6.
The software market has been equally perplexing,
especially in the systems-management sector.
Aprisma Management Technologies (a Cabletron
Systems subsidiary) says sales will grow more than 70
percent during the company's current fiscal year, which
ends in about five weeks. Likewise, CA announced
strong quarterly results last week. Yet, IBM's Tivoli unit
stumbled badly in Q4 (see Newsline). Tivoli's ugly
performance was the one blemish in IBM's otherwise
solid quarter.
Even Microsoft was forced to issue an earnings warning
in December—its first such warning in a
decade—because of the slow PC market. Apple
Computer, Compaq, Gateway and Hewlett-Packard all
have hit financial bumps in recent weeks. Hardest hit
was Gateway, which is planning layoffs to bring costs
in line with sales.
Compaq wasn't spared, either. After hoping for 10
percent growth this year, the company now says it
expects single-digit growth in the 6 percent to 8 percent
range. But the news isn't all bad. CEO Michael
Capellas says Compaq's enterprise
business—spanning servers and storage—offset
softness in the PC market.
Still, Wall Street is bracing for an extended slowdown.
"It's pretty nice to be privately held right now," quips
Candle vice chairman Robert LaBant. |
