Technology execs, analysts see outlook brightening
By Nicole Volpe
BOSTON, Sept 15 (Reuters) - A recovery in the semiconductor
sector and in business software, and a collective shrug at the
Year 2000 computer problem, cast a positive light on the
outlook in the technology industry at an SG Cowen Technology
conference here this week.
Companies such as Lucent Technologies Inc. , the
leading communications equipment provider, and Computer
Associates International Inc. , a top business software
company, said Y2K -- shorthand for the problem old computer
systems have recognizing the year 2000 -- is generally a
non-issue.
"We don't expect Y2K to affect fiscal 2000, and our first
half," said Lucent Technologies Executive Vice President Pat
Russo. "For the December quarter, we don't currently see any
impact of Y2K, although it would be imprudent not to
acknowledge it exists as a fact of life."
Investors and analysts at the SG Cowen event said they felt
reassured by such optimism but expressed concern the positive
outlook left little room for any unexpected disappointments
with late-breaking glitches or customer spending lockdowns.
Computer Associates President Sanjay Kumar said that
business was again coming on strong, after a slowdown in deals
as customers focused their budgets on Y2K fixes.
But analysts advised investors to be cautious, saying that
business software clients may still freeze their budgets as the
new year approaches
"With respect to information technology budgets, we're
hearing a lot at this conference from the standpoint that Y2K
is no big deal. It's been almost a script here that management
seems very sanguine," said SG Cowen software analyst Richard
Chu. "It seems very clear to me that three or four months
before the end of the year is not yet time to let down our
guard."
SG Cowen software analyst Drew Brosseau warned that
business software might not accelerate fully into the fast lane
next year. He argued that business software companies may have
actually had some positive impact from Y2K fixes that would
drop out as a revenue driver next year.
"Companies like CA or Oracle (Corp. ), there is no
question that those companies have benefited from stimulation
in the storage areas," he said. "They'll suggest that none of
the Y2K spending is in their numbers; but you have to wonder,
especially in mainframe systems, what effect there has been
that they don't know about."
Investors said the optimism seems already reflected in
stock valuations and expressed caution.
"Nobody, the investors and the companies, seem to be
concerned about Y2K," said Christophe Nage, a manager for
Carmignac Gestion, a French fund with $400 million in assets
invested in tech and biotech companies. "If there is a
shortfall in Q4, that would be a problem."
Nage said he also viewed the semiconductor sector, in a
recovery after a three-year downturn, already has much of the
recovery built into stock prices, citing recently renewed
investor interest in a market driven by strong personal
computer sales, wireless devices and Internet growth.
"I don't see much upside left in the semiconductor stocks,"
he said.
SEMICONDUCTOR SECTOR PICKING UP
Executives from Novellus Systems Inc. , National
Semiconductor Corp. and Rambus Inc. said
business in the semiconductor sector was picking up.
"From a DRAM (dynamic random access memory) standpoint, we
are at the bottom going up," said Rambus Chief Executive and
President Geoff Tate. "I think a lot is predicated on the PC
business, and we've got this new model of people giving PCs
away, which could be a bubble. But it doesn't matter if they
give them away if demand is still strong and DRAM prices are
going up."
SG Cowen semiconductor analyst Min Pang said he foresees a
three to four-year upturn.
"These things are not without their hiccups, but there is
plenty of gas in the tank," he said. "Typically, what you see
in the early period of recovery are excessively high
expectations (from investors) in comparison to earnings
estimates. But estimates are still very low, and as estimates
edge up, there will be more upside."
He pointed out that the semiconductor industry is what
enables technology as a whole to move forward, as faster,
smaller and more efficient chips are developed.
Such developments in computer chips allow for more powerful
PCs and faster Internet connections, driving a new economy
based on the Web.
Motorola Inc. created a buzz at the conference,
with its $11 billion deal to buy General Instrument Corp.
, the largest producer of cable TV set-top boxes.
Motorola, best known for making semiconductors, cellular
phones and pagers, is looking for a stronger presence in the
fast-growing market for high-speed Internet services.
Dell Computer Corp. , already providing Internet
access, said it was looking to sell customers Web hosting and
other features, especially related to electronic commerce.
((New York newsroom, 212-859-1610)) |
