Tech execs feel slump is behind them
Fri Jan 16, 6:17 AM ET Add Business - USATODAY.com to My Yahoo!
By Kevin Maney and Michelle Kessler, USA TODAY
The technology slump is history.
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That's the collective feeling after a week of upbeat tech earnings news, topped off Thursday by IBM's strong performance. After a nearly three-year tech downturn, consumers and businesses are once again buying computers, networking equipment and technology services, say analysts and executives.
It's not a flood of spending, but small upward ticks are packing a punch. During the slump, many tech companies cut costs and made operations more efficient, so increases in sales are flowing right to the bottom line.
IBM (IBM), for instance, reported that earnings this past quarter nearly tripled on an 8% increase in revenue vs. a year ago.
This year "begins the next growth cycle for technology," says John Joyce, IBM's chief financial officer - his most jubilant statement yet about a recovery.
"CEOs are taking their foot off the brake, and it's heading toward the gas pedal" of tech spending, says John Chambers, CEO of Cisco Systems (CSCO), which will report earnings Feb. 2.
The better times are helping even struggling companies, as Sun Microsystems (SUNW) showed Thursday. Sun reported revenue of $2.9 billion for its second fiscal quarter, down 1% from a year earlier. That's lackluster compared with IBM and Intel, but a good sign for Sun.
However, this is not the start of a tech explosion like the 1990s, industry executives say. Growth is expected to be steadier and more focused.
For instance, companies that sell huge corporate software packages, such as SAP (SAP) and Siebel Systems (SEBL), have been plodding, while upstarts offering Web-based corporate software have been taking wing. One of those, Salesforce.com, is expected to be among 2004's hottest IPOs. Also, while Intel's earnings doubled last quarter, the company says that much of that growth came from selling chips for laptops with wireless Internet access, reflecting the growing popularity of Wi-Fi. What companies reported:
• In the fourth quarter of 2003, IBM earned $2.7 billion, or $1.55 a share, on revenue of $25.9 billion. A year ago, IBM earned $1 billion on $23.7 billion in revenue. CFO Joyce sees IBM and the tech industry gaining momentum, suggesting analysts' forecasts for IBM's 2004 growth might be low.
IBM shares closed Thursday at $94.02, up $3.71.
• Sun lost $125 million in the quarter, thanks to cost controls, Sun says. It lost $2.3 billion a year ago, including a huge write-down. The news, released after the market closed, sent Sun shares up 5 cents to $5.41 in after-hours trading.
The No. 4 computer server maker soared during the tech boom, selling proprietary business computers. But Sun is struggling as "the world moves to standardized products that are much cheaper than the stuff Sun sells," says Needham & Co. analyst Charles Wolf. |
