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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: lurqer who wrote (22707)	7/18/2003 9:24:46 PM
From: stockman_scott	Respond to of 89467

Take a Global Look at Tech Stocks' Outlook By Lucas van Grinsven European Technology Correspondent AMSTERDAM (Reuters) - Most technology firms have become master cost-cutters to squeeze out higher profits, but they cannot hide the fact that sales remain slow as the latest quarterly results start coming in. On Thursday, handset maker Nokia (news - web sites)'s second-quarter results finally popped a bubble that has built up since March as fears for the impact of the deadly SARS (news - web sites) virus in Asia have faded and hopes for an economic recovery have turned into expectations. Europe's tech barometer, the DJ Stoxx Eurotech index, had gained 54 percent from its March 11 low to Wednesday, unfazed even after a series of very cautious outlooks this week from tech icons such as Intel, IBM, Motorola, Philips and ASML . Nokia's remarks, however, punched all remaining confidence out of the market when it said that sales of its money-spinning handset division would be flat to lower in the third quarter and that average selling prices fell sharply in the second quarter. Shares in Nokia, the world's largest handset maker and Europe's leading tech stock, plummeted 16 percent and dragged the Eurotech index down by over eight percent. "Investors had hoped consumers would buy expensive handsets with color screens and that average selling prices would rise. It hasn't happened and cracks in the growth story have emerged," said a manager at a major pension fund in the Netherlands. Nokia Chief Executive Jorma Ollila told investors in a call that the weak economy was hurting his business. "European economies are dead. There's no growth. Consumer confidence is low," he said, adding that his new fancy phones could only be sold if consumers were willing to splash out. "You need a bit of optimism. You need people to be willing to try out something new. You don't see that other than in well developed markets like Britain and Scandinavia," he said. Nokia's story, selling more handsets but at lower prices, also holds true for computer makers. Research group Gartner Dataquest said Thursday that second-quarter global PC unit shipments grew 10 percent, largely because of steep price cuts. THRIFTY CONSUMERS Europe's largest consumer electronics group Philips made almost identical remarks just two days ago when it reported 18 percent lower revenues for the second quarter. Philips said it saw no signs of recovery in demand for its consumer electronics products, adding European consumers in particular were reluctant to buy big television sets. They instead opted for cheaper TVs, which carry lower profit margins. "The US market did okay, and consumer sales were up in dollar terms. But I'm not sure we will maintain a positive position (profit) in Europe," its Chief Financial Officer Jan Hommen then said. Sadly for European firms, any sales in dollars either in the Americas or Asia are translated back into expensive euros, up 20 percent compared with a year earlier, hurting the top line. Nokia's woes will soon hit its suppliers, analysts said. "Nokia will take this out on their suppliers such as STMicroelectronics by either ordering less inventories or squeezing their margins," said Steve Woolf, a semiconductor analyst at Commerzbank in London. ST shares fell 4.6 percent. Thursday's sell-off marks the third consecutive year in which investors were proved wrong to buy into a second half recovery. It is not just consumers spoiling the party, as Europe's top enterprise (news - web sites) software firm SAP also clouded the atmosphere. Its second-quarter software sales published Thursday, a key measure of underlying growth, fell 13 percent. The company raised its profit margin target for the full year, but investors said it was not enough, and its shares dropped seven percent at 101.06 euros. "Do you really want to pay 30 times earnings for a company that is actually not growing?," Frankfurt Trust fund manager Friedrich Diel said.