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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (38573)	10/21/2000 1:44:08 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

October 20, Computer Firms' Earnings Keep the Waters Muddy By JASON FRY and KRISTIN HUSSEY WSJ.COM Earnings season is always a time for investors and analysts to ponder the tea leaves, but this time around the would-be oracles have gone about their job with particular care -- for that, blame the triple threat of the Nasdaq's April meltdown, worries about sluggish personal-computer growth and the slump in online advertising. The week brought plenty of earnings in the PC world -- giants International Business Machines Corp., Microsoft Corp., Apple Computer Inc., Intel Corp. and Sun Microsystems Inc. all reported. But patterns proved elusive. In some cases, companies' ongoing issues dominated the numbers and the resulting discussion; in others, investors and analysts discovered little that they didn't already know.Warnings of sluggish PC growth have cast a pall over the computer industry all year and intensified in recent weeks, with the big blow being Dell Computer Corp.'s announcement early this month that revenue growth will fall considerably shy of analysts' estimates. But earnings statements from Microsoft, IBM and Apple didn't clarify things to the extent analysts and investors would have liked. Microsoft posted higher-than-expected revenue and earnings for the first fiscal quarter; perhaps even more significantly, the traditionally cautious software giant didn't take the opportunity to poor-mouth coming quarters, sticking to its revenue forecast for the quarter ending in December. Given Microsoft's reliance on PC sales as the driver bar none for software revenues, that was reassuring. On the other hand, a lot of the upside Microsoft saw came from gains on investments, and on a year-over-year basis revenue from the key Office software suite actually declined. Apple's news, on the surface, was obviously bad: The PC maker missed already-lowered expectations and cut profit targets for the fiscal year as it girded itself to tackle problems with built-up inventory. For investors used to a run of good quarters from the revitalized company, both September's warning and this week's results were deja vu all over again: Among other things, Apple said consumers saw its much-praised Power Mac G4 Cubes as too expensive, which had reminded some of Jean-Louis Gassee's infamous sneer that "we make Hondas, not Yugos." The company also blamed a change in a sales system for a slowdown in sales to schools and universities. But the company isn't ignoring the problems: Chief Executive Steve Jobs said Apple would offer $300 rebates on the G4 Cubes. Are Apple's problems more internal than external? Time will tell. IBM also gave investors more of the same: The computer giant matched expectations, but revenue grew just 3%, hampered by slow software sales and supply woes -- and that meager uptick actually marked the first move forward for revenue after three periods of year-over-year revenue declines. IBM managed to make the quarter look decent by falling back on muzzling costs and repurchasing shares, but analysts and investors are still awaiting a clear indication that Big Blue is over a string of problems that began a year ago with troubles related to the year-2000 issue. As for Intel, it managed to top estimates -- but the results only wound up matching what analysts had expected before the chip giant warned of a revenue shortfall last month. To make matters worse, Intel issued a fourth-quarter revenue forecast that was widely seen as conservative. Did that have something to do with fears of waning PC sales? Absolutely -- but it was also seemed as determination to avoid further embarrassment by having to lower guidance once again. Nor was that the only internal factor at work: Intel had spent much of the year striving to make enough processors to meet demand, only to see that demand slow once it did catch up. And Advanced Micro Devices Inc. -- perennially the New York Mets to Intel's Atlanta Braves -- is once again snatching market share away from the chip giant. And then there was Sun, which came out with the kind of quarter companies dream about even in the best of times. All Sun managed to do was report 60% revenue growth and earnings that topped even the bullish forecasts, a clear indication that the maker of high-end computers is increasing its lead on its competitors. Granted, Sun isn't a PC maker. But the news was still galling for its rivals, which compete with Sun on a number of fronts, from servers themselves (IBM) to the software that runs them (Microsoft). But even Sun didn't have a perfect day: The company jumped the gun by accidentally posting a headline about its earnings on its Web site, confusing investors. In a week in which no earnings release seemed to come without enough contradictory information to keep the waters muddy, that made perfect sense.