Tech stocks dropped last month, with chip, Internet and software shares
falling the most, while telecom gear issues' decline was milder. Yet, for the
first quarter, chip and computer shares fared the best, while Internet,
telecom gear and software issues plummeted. Discount-buying in chips in
February, bullish sentiment on Apple Computer and a new CEO for Hewlett-
Packard helped the chip and hardware issues' performance in 1Q. Looking ahead,
economic worries could continue impacting the broader market, including techs,
amid volatility in crude prices. Talking to The Wall Street Journal, Lehman
Brothers' Matthew Johnson remarks, "If there was any time when the market was
at an inflection point, it is now. We are at the point now where the market is
going through an inflation scare." Amid the uncertainty, and at the onset of
the 1Q earnings season, one way to gauge the market's mood and pick stocks is
to use earnings-estimate revisions. The method entails comparing earnings
expectations for a firm over the next year with what expectations were three
months ago, or comparing how many times analysts have recently lifted their
earnings estimates for a firm versus how many times they have cut them. While
investors' faith in analyst research had eroded after the tech bubble
scandals, anecdotal evidence suggests investors have renewed confidence in the
sell-side, buying or selling en masse on an estimate revision, said ING's
Krista Kennedy to WSJ. One issue that could cloud matters for analysts is that
last week, regulators issued guidelines on the ac-counting of stock options'
expensing, giving wide latitude to firms on the issue. This could make it
difficult for analysts to compare financial statements and come up with
adequate estimates, even though firms are expected to disclose details about
their methodology. Select approaches could eventually emerge as best
practices, noted The New York Times. In the meantime, the devil could lurk in
the details ...
High-Tech Monday Update is provided courtesy of Thomson Financial. This
information is believed to be true and accurate; we take no responsibility for
inaccurate information and reserve the right to update our reports. For more
information, please visit our web site at http://www.thomson.com/financial.
SOURCE Thomson Financial Corporate Group
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