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To: DEER HUNTER who wrote (4664)	7/7/2000 7:49:42 PM
From: DEER HUNTER	Respond to of 5232

related news.... Friday July 7 7:41 PM ET Tech Companies Harder To Evaluate By CLIFF EDWARDS, AP Technology Writer SAN JOSE, Calif. (AP) - Creative accounting techniques are adding to the difficulty of evaluating the financial health of technology companies, analysts say. That isn't helping the sector, especially with second-quarter earnings reports around the corner. A decision by Intel Corp. (NasdaqNM:INTC - news) to include one-time investment gains in its upcoming results has confounded Wall Street insiders and caused investors to howl about the high-tech havoc. Meanwhile, business software companies Computer Associates International Inc. (NYSE:CA - news) and BMC Software Inc. (NasdaqNM:BMCS - news) warned this week they will fall well short of analysts' expectations, pulling technology stocks lower. Competitor Compuware Corp. followed Friday with its own dismal outlook. Speak your mind Discuss this story with other people. [Start a Conversation] (Requires Yahoo! Messenger) ``It's becoming harder to compare apples to apples in the high-tech industry,'' said analyst Robert Johnson at ABN Amro Inc. in Chicago. ``It's just a massive problem for investors today in the technology field to compare company to company. Because of the intellectual capital nature of their products, there are so many questions and more room for flexibility on the reporting side than other industries.'' But the ability to show constantly improving quarterly figures appears to be getting harder. More than half of the 300 U.S. firms that have released pre-earnings guidance to Wall Street have issued profit warnings for the three months ending June 30, according to First Call/Thomson Financial. Analysts already had been expecting a comparison to last year to be difficult. Many companies went on a buying spree in the comparable quarter last year when technology officers took advantage of corporate CEOs issuing blank checks for Y2K preparedness. Meanwhile, spending on technology in Europe this year has not risen as fast as many had expected, Johnson noted. Wall Street has come to expect that technology companies will be conservative in their profit forecasts, using legal accounting maneuvers and other means to help match or beat estimates. The entire technology sector is expected to post 37 percent profit growth in the quarter. Instead, investors returned from the Independence Day holiday weekend to warnings that Islandia, N.Y.-based Computer Associates and Houston, Tx.-based BMC Software will badly miss analysts' earnings expectations. Both companies cited lower-than-expected demand for the mainframe computers in which they supply software. The trend has affected the entire industry because many customers have delayed new purchases until they hear details on shipments and pricing of a new IBM mainframe expected later this year, analysts said. Investors responded by pounding shares of both companies on Wednesday, with Computer Associates plummeting 42 percent and BMC off 40 percent. The warning raised fears that other technology companies will also issue disappointing results when the earnings reporting season goes into full gear in the next several days. The negative outlooks continued Friday, when Farmington Hills, Mich.-based Compuware said that poor sales of software would cause it to miss expectations. On the opposite end, Intel raised eyebrows late last month after the Santa Clara, Calif.-based chipmaker announced it would include a total of $2.3 billion in investment gains in second-quarter results due July 18. Many companies and research firms traditionally exclude one-time gains from the sale of investments, but Intel's decision will allow it to report per-share profits doubled in the year-over-year period instead of posting a more modest increase. ``Although we've been including Intel's guidance on investment gains in our estimates, it just doesn't seem right to do so as the number gets to be this obscene,'' analyst Terry Ragsdale of J.P. Morgan Securities Inc. wrote in a June 21 report. Still, massaging numbers has made reading earnings reports more difficult. Other technology companies, including Yahoo! Inc. and Nortel Networks, have gotten into the practice of excluding costs of acquiring other companies - particularly if including them would result in an operating loss. Intel spokesman Chuck Mulloy suggested the problem lies not with companies but with Wall Street investors wanting few surprises - unless they're good ones - when earnings are actually announced. ``We're not trying to play games, we're trying to make sure everybody understands that the guidance we gave was low and we have higher numbers coming in,'' Mulloy said. ``All we're trying to go is give the investor a sense of what we expect to happen during the quarter,'' he said. Analysts remain optimistic this will be a good year for many technology companies. Internet network equipment provider Cisco Systems Inc. (NasdaqNM:CSCO - news), for instance, still expects revenue growth this year in the 30 percent to 50 percent range, said spokesman Tom Galvin. -