Tech stocks plumbed new lows last week, with computer and chip shares
pacing the decline, amid disappointing results and/or outlooks from Apple
Computer, IBM, ASML Holdings and Advanced Micro Devices, among others. A long
list of profit warnings from the likes of Compuware, Foundry Networks and
SpectraLink also weighed on investor sentiment. Looking ahead, most major
sector bellwethers will report their quarterly results this week. A quick look
at research notes on the sector reveals that analysts seem to have modest
expectations, especially for chip and computer companies. For instance, Morgan
Stanley expects most chipmakers to at least meet estimates and most management
teams to provide guidance for modest revenue growth in the second quarter.
Yet, the broker notes that there are few strong near-term drivers for demand
and that pricing trends should become more aggressive. Negative surprises will
likely increase in the second or third quarter in light of recent weakness in
numerous global economic data points, concludes the broker. While declines in
global handset shipments and lower spending on telecom gear, amid a
consolidation wave in the U.S. telecom sector, could reduce earnings of
telecom equipment makers, some analysts point out that several technological
changes could provide support to the group, leading to healthy results this
season. However, the overall technology winner appears to be the Internet
sector, with giants like Yahoo! and Google widely expected to surprise to the
upside, due in part to strong advertiser demand and global expansion. In sum,
with few exceptions, analysts largely expect this earnings season to be in
line, although last week's bearish results suggest that even such modest
expectations may be too lofty. Also of note, this week's fresh inflation data
could shake investors out of their torpor, amid ongoing worries about the pace
of upcoming interest rate hikes.
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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