CORRECTED-PC maker views more important than result news
In San Francisco/New York story "PC maker views more
important than result news" please read in 5th paragraph...
Wednesday... instead of... Tuesday... (correcting day when IBM
and Apple report).
A corrected version follows:
By Peter Henderson and Nicole Volpe
SAN FRANCISCO/NEW YORK, April 16 (Reuters) - A raft of
profit warnings by computer makers has taken the focus off the
latest quarter's results, leaving investors watching for
glimmers of a recovery or signs of more trouble to come.
Computer companies, several of which are scheduled to
report earnings this week, will say whether they are willing to
set long-range targets in the current slowing economy.
"You don't set the bar for the second half of the year when
your stock is at a 52-week low," said Ned Klingelhofer, manager
of a $120 million fund for San Francisco Sentry Investment
Group. "If you don't make it for some reason, it just gives
institutions another excuse to sell."
Almost every major technology hardware company, with the
exception of International Business Machines Corp., <IBM.N> has
warned on its performance for the latest quarter, although many
that warned a month or more ago may miss lowered targets.
IBM and Apple Computer Inc. kick off the hardware earnings
quarter on Wednesday, followed by network computer maker Sun
Microsystems Inc. <SUNW.O> and PC maker Gateway Inc. <GTW.N> on
Thursday. Compaq Computer Corp. <CPQ.N> reports on April 23,
followed by a respite of big names until mid-May.
Merrill Lynch analyst Steve Fortuna said in a call to
clients that he believes Compaq and Gateway would continue to
disappoint over the coming year.
"We believe Compaq will feel pain over Q2, Q3 and for the
rest of the year," he said. His current forecast for a 7
percent revenue decline at Gateway for the full year may be too
optimistic, he added.
Klingelhofer, whose fund is about half technology stocks,
pointed to one of the computer sector's best recent stock
market survivors, Dell Computer Corp., as having some success
at ducking questions about what the rest of the year will look
like.
Earlier this month, Dell rallied after it reaffirmed
limited expectations for the current quarter and trumpeted how
its low-cost, direct sales business was allowing it to steal
its rivals' customers.
But Dell, which warned five times last year, also shied
away from forecasts beyond the current quarter -- giving a
lesson for chief executives in managing expectations, said
Klingelhofer.
"They just don't need to stick their necks out there," he
said.
The admissions of failure from all sides has increased
pressure on tech heavyweights IBM, which has stayed mum on the
current quarter, and Sun, which has kept silent since a late
February warning -- ancient history, in the current market.
Merrill Lynch analyst Thomas Kraemer said that companies
that sell powerful computers to run businesses may pull through
for the first quarter, but then collapse in the second
quarter.
"We suspect also a lot of our companies have pushed,
especially the server vendors, very hard to make their quarters
this quarter -- and left the pipeline for the June quarter
pretty empty," he said.
"I would expect calendar Q2 of this year is really going to
be heartbreak hill, and potentially the toughest quarter," he
added. "We would not be surprised to see just about any single
company in our coverage preannounce."
Those forecasts that do emerge will be counted at a premium,
analysts said. Silence will only intensify pressure on analysts
to comb records for evidence of how well corporate chiefs are
managing assets to extrapolate who will survive.
JP Morgan Chase's Daniel Kunstler agreed he would be
watching for evidence of how bosses were handling tight
resources.
But he expected executives would roll out forecasts for the
rest of the year, in a kind of spring cleaning that may
actually send stock prices up.
"There might be some general relief that by the end of
(the) week, everybody that matters will have pretty much come
clean," he said. "Everybody will have adjusted the expectations
downward for the balance of the year."
Storage leader EMC Corp. last week cut expectations but
said customers had finally set budgets for the year. "From Sun,
what I would anticipate will be something analogous to EMC: now
we're in a better position to see when they'll start loosening
the purse strings," Kunstler said.
Customers may have a better feel for when they would install
major new systems, which would make it easier for vendors of
high-end hardware to give solid guidance. But PC makers dealing
in more commodity-like wares would have less insight, Kunstler
said.
Whatever the forecast, investors may reward concrete
answers, he said.
"I prefer as an investor 80 cents I can be confident in as
opposed to $1 I can't be confident in at all," Kunstler said.
Spoilers are already out in force. Dan Warmenhoven, head of
storage company Network Appliance Inc., warned on the same day
as EMC. He said he was not certain he would give more than one
quarters' guidance, as he had been tricked before into
believing customers' technology budgets were set, only to watch
expected orders disintegrate.
Hewlett-Packard Co. chief Carly Fiorina has shown more
restraint after previous misses tarnished her reputation on
Wall Street. She blamed the economy as well as sales problems
of the company's own making for lowering the outlook early this
year.
"A CEO is not going to call you up one day and say this is
the bottom," said Beau Duncan, chief investment officer at San
Diego's Duncan-Hurst Capital Management.
Thomson Financial/First Call analyst consensus estimates:
Company Date EPS range (avg) Revs ($)
Apple Computer Inc 4/18 -8 to +7 (+1) 1.35 bln
Compaq Computer Corp 4/23 12 to 15 (13) 9.18 bln
EMC Corp 4/19 17 to 21 (18) 2.38 bln
Gateway Inc 4/19 -10 to 3 (-1) 2.02 bln
Dell Computer Corp 5/11 16 to 18 (17) 8.04 bln
Hewlett-Packard Co 5/16 32 to 38 (35) 12.19 bln
IBM 4/18 89 to $1.02 (98) 20.79 bln
Network Appliance 5/18 1 to 3 (2) 254 mln
Sun Microsystems Inc 4/19 3 to 13 (7) 4.45 bln
((Peter Henderson, San Francisco Bureau 415 677-2578
peter.henderson@reuters.com))
REUTERS |
