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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (35147)	4/2/2001 3:19:48 PM
From: 2sigma	Read Replies (1) \| Respond to of 65232

Dear PiM, I heartily concur with your analysis! You are well done, I am still bloody. {g} Haps.

To: Jim Willie CB who wrote (35147)	4/3/2001 4:17:22 AM
From: stockman_scott	Respond to of 65232

Earnings Warnings Sign of Weak Economy Monday April 2, 10:13 pm Eastern Time By Andrea Orr <<PALO ALTO, Calif. (Reuters) - Corporate America closed the books on the first quarter of 2001 last week, but it could not so easily forget all the business it lost during the first three months of the year, which came back on Monday in the form of widespread earnings warnings. At least 20 companies warned on Monday that their first quarter results would fall short of expectations, making the day one of the worst news days following one of the worst business periods in recent memory. In fact, as a growing list of companies lower their first quarter sales and earnings numbers, the data on these so-called earnings warnings is proving to be yet another measure of how swiftly and severely the economy is softening. Some numbers to consider: A total of 694 companies had issued first quarter warnings as of last Friday. Since many companies are not able to assess the quarter until the books are closed, more warnings are expected this week. By all accounts, the final number of first quarter earnings warnings will easily beat the old record, of 794, set in the fourth quarter of 2000. And that total was significantly greater than the prior record, of some 554 warnings, set in the fourth quarter of 1998. FORECASTS WERE ACCURATE DURING THE BOOM YEARS ``We're in freefall,'' said Chuck Hill, director of research at Thomson Financial/First Call, which closely monitors company earnings estimates. ``If anything, the rate of freefall may have slightly accelerated.'' In another sign of how quickly business conditions have soured, some of the companies to warn about soft earnings in recent weeks had issued statements just months ago, insisting that their business was on track. Semiconductor equipment maker Novellus Systems Inc (NasdaqNM:NVLS - news), for example, said in mid-January that it had not seen any of the order cancellations plaguing some of its competitors. Just six weeks later, it cut first quarter revenue forecasts and said visibility on business prospects for the rest of the year was limited. That companies try in the first place to predict how much money they will make in a given quarter is a relatively new phenomenon, fueled in part by laws that protect them from being sued for inaccurate forecasts, provided that they had made certain disclaimers. Still, the large number of earnings misses seen currently, comes on the heels of a prosperous period in which most companies, particularly high-tech companies, would either surpass their earnings estimates or hit them on the nose. Michael Darby, Professor of Money and Financial Markets at the Anderson Graduate School of Management at the University of California Los Angeles, says the boom years of the late 1990s left an unrealistic picture of how easy it was to predict earnings. LOOKS LIKE THE 1970s RECESSIONS ``I would say more troubling than the earnings misses today is that companies tended to hit their targets so exactly in the past. It suggests they were managing their earnings, choosing whether to include certain business, or hold it until the next quarter,'' said Darby. But when business stops coming in, it is no longer possible to manage earnings. Although some companies may be flush for a while with business left over from better times, they eventually have to show the investing world the state of their business as it is today. Some more numbers on how swiftly earnings growth has eroded: In the third quarter of last year the group of S&P Tech sector companies showed 42 percent earnings growth. By the fourth quarter that was down to three percent growth. And first quarter 2001 earnings look to be down 36 percent. Although Thomson Financial/First Call was not around to track earnings estimates during the two big recessions of the 1970s, Chuck Hill says he personally remembers those downturns and sees some alarming parallels with today's economy. ``This has the feel of how things fell apart in 1969 and 1973 and 1979,'' said Hill. While the 1990s saw an explosion in the number of Internet and software companies, the 1960s gave birth to hundreds of computer peripheral companies, making things like printers and terminals and disc drives. And they saw their share prices soar, until the market discovered there were just too many companies out there doing the same thing, said Hill.>>