A PLUG FOR DELL IN THIS ANALYSIS; ALSO TECH EARNINGS ESTIMATES
Computer makers results seen solid, economy nags
Reuters, Sunday, October 11, 1998 at 20:09
By Eric Auchard
NEW YORK, Oct 11 (Reuters) - Leading computer makers are
expected to show solid growth in quarterly financial results
this month, but that is unlikely to mollify investors who fear
the world economy is headed for a technology spending slowdown
in 1999.
In the short-run, computer firms are generally seen meeting
or beating earnings expectations as they report September
quarter results during the next two weeks, thanks to a seasonal
sales upswing that typically begins each year in the third
quarter and continues into the holiday season.
Many computer suppliers can boast of refreshed third
quarter product lines, increasing profit margins and an end to
the glut of personal computer inventory that throttled results
at several top manufacturers earlier this year.
The fourth quarter should see further acceleration of these
trends, most companies are expected to say during meetings with
Wall Street analysts scheduled to be held after each company's
earnings report.
But it's what computer companies cannot see so clearly that
has investors worried -- the stocks have been bloodied in
recent weeks as gee-whiz optimism about inexorable growth has
vanished, at least for now, with executives waiting to see how
corporate spending plans play out.
"Investors are looking out beyond the next two quarters to
1999," said Salomon Smith Barney analyst Rich Gardner. "They
are concerned about the future."
It's what Bear Stearns senior computer analyst Andrew Neff
refers to as the question of the moment for technology
investors: "What is the impact of the global economic turmoil
on computer spending?"
In uncertain times, Neff is telling investors to focus on
stocks that are beginning to benefit from a hot product cycle,
such as IBM with its new mainframe line-up, or Apple Computer
Inc. with its sleek iMac consumer machines, both introduced in
August.
Or look for companies with a compelling investment theme,
such as Dell with its highly competitive direct-distribution
strategy, which continues to take market share from other PC
makers, he said.
Wall Street hungrily awaits Apple's fourth quarter earnings
report due out on Wednesday afternoon.
Last week, the company announced that Chief Executive Steve
Jobs would reveal Apple earnings during a special meeting set
for October 14 at 2 p.m. EDT (1800GMT), at which the company
will also reveal sales statistics for the iMac and unveil the
latest version of its Macintosh operating system.
"It has to be good news," Gardner said of the company's
move to announce earnings prior to the close of trading on
Wednesday, giving the stock time to react. Apple traditionally
reports its earnings after normal trading has finished.
Compaq officials have asked Wall Street to consider the
company's third quarter "transitional" as it focuses on the
integration of its $8.4 billion Digital acquisition in June.
They have guided analysts to expect earnings for the
quarter of 6.0 cents per share. Comparisons with a year ago are
confused by the combination of the merged companies' results.
But Compaq appears ready to report continued progress in
holding down inventory levels, a problem that crippled its
earnings during the first half of the year.
On Friday, CEO Eckhard Pfeiffer said in a television
interview that excess PC inventory had been cut to the "lowest
levels in the history of our company." In the same CNBC-TV
program, Pfeiffer also said that the Digital acquisition was
proceeding "perfectly on schedule."
There are some limited concerns about Compaq's revenue
growth in the third quarter, owing to concerns about product
shortages, Soundview Technology Group analyst Mark Specker
said. The median revenue estimate among Wall Street analysts is
$9.1 to $9.2 billion for the quarter.
He said there were signs that Compaq had had difficulties
building enough computers to meet demand, especially Intel
chip-based servers, which are a key profit-source. However, a
shortfall here leaves room for Compaq to make up this business
in the fourth quarter, he noted.
IBM's growth engines continued to blast during the third
quarter, several analysts agreed. IBM's fast-growing computer
services business, which accounts for about one third of
corporate revenues, announced a string of billion-dollar-plus
contracts and renewals.
IBM's highly anticipated G5-series mainframes first shipped
in August, leaving little time for them to have much effect on
third quarter results, but at least ending the period of flat
growth in this key, highly profitable business area.
Solid performance in other areas could also help offset
slower-growing businesses and the threat posed by world
economic turmoil to revenues from IBM's multinational corporate
customer base.
ABN Amro analyst David Wu said he expected a strong report
from Sun Microsystems, noting that the company has made gains
in the market for computers used to manage large enterprises,
moving into the top ranks with IBM and Hewlett-Packard while
leaving Compaq's Digital unit behind in the second-tier ranks.
But Sun could be exposed by its relatively large dependence
on sales to Wall Street brokerages, which are sharply cutting
new spending to compensate for last quarter's trading losses.
Rational arguments aside, Neff said that with the current
extreme jitters among investors, "stocks could remain volatile
and susceptible to anecdotal reports of companies cutting back
(spending)."
Gardner sees selected opportunities in the sector. "With
the market down so much, we could see some pops in selected
stocks," he said, pointing in particular to Apple Computer Inc.
and Compaq Computer Corp.
"At the minimum, we have a quarter coming up that's good,"
Wu said of third quarter financial reports. "Whether it's more
than just seasonal strength, we still don't know."
The following list of companies includes First Call
estimates for the upcoming quarter compared to results from the
same quarter a year-ago. Fiscal quarters varying from calendar
quarters are noted and losses are listed in parentheses:
Apple (NASDAQ:AAPL) Q4 $0.49 $(0.19) Oct. 14
Compaq (NYSE:CPQ) Q3 $0.06 $0.36 Oct. 14
Dell (NASDAQ:DELL) Q3 $0.27 $0.18 Nov. 12
Gateway (NYSE:GTW) Q3 $0.47 ($0.08) Oct. 22
Hewlett-Packard (NYSE:HWP) Q4 $0.74 $0.75 Nov. 15
IBM (NYSE:IBM) Q3 $1.53 $1.35 Oct. 20
NCR (NYSE:NCR) Q3 $0.21 $(0.09) Oct. 14
Silicon Graphics (NYSE:SGI) Q1 ($0.45) $(0.20) Oct. 21
Sun Microsystems (NASDAQ:SUNW) Q1 $0.49 $0.41 Oct. 15
Unisys (NYSE:UIS) Q3 $0.25 $0.13 Oct. 15
Copyright 1998, Reuters News Service
Companies or Securities discussed in this article:
SymbolNameNASDAQ:AAPLApple Computer IncNYSE:CPQCompaq Computer CorpNASDAQ:DELLDell Computer CorpNYSE:GTWGateway 2000 IncNYSE:HWPHewlett Packard Co (De)NYSE:IBMIntl Business Machines CorpNYSE:NCRNYSE:SGISilicon Graphics IncNASDAQ:SUNWSun MicrosystemsNYSE:UISUnisys Corp
Return to Headlines
The information provided by Quote.com is for information purposes only and should not be used or construed as an an indicator of future performance, an offer to sell, a solicitation of an offer to buy, or a recommendation for any security by Quote.com or Fidelity. Neither Quote.com nor Fidelity guarantees the suitability or potential value of any particular investment.
The information accessible through this area is provided by Quote.com. Quote.com is not affiliated with any Fidelity company or affiliate. The information has been independently obtained and prepared by Quote.com which is not affiliated with Fidelity. Fidelity has not reviewed the information, and neither Fidelity nor Quote.com provide a guarantee that the information is accurate, complete, or timely.
See the User Agreement for more information about your use of information found here.
All market data provided by Quote.com. Inc.
|
