One week chases another, and what a difference! Last week's upbeat results
from the likes of Intel, Yahoo and Motorola sharply contrasted with IBM's
disappointing earnings and outlook the prior week. As more tech quarterly
reports are on the way, analysts are trying to account for such stark
differences between bellwethers, differences which for investors signal it is
time to be discriminating. Macro issues, such as robust oil prices, mounting
inflation and interest rates and signs of a modest economic deceleration, are
impacting all sectors. Due to the uncertainty, corporate spenders, who often
wait until the end of quarters to see how their company is doing before making
their IT purchases, have sometimes delayed their orders lately, as an
increasing number of tech firms confirmed in their latest corporate reports.
Yet, this still does not account for the stark contrast in performance between
bellwethers. One possible explanation offered by some analysts in BusinessWeek
is that we are experiencing a transition, as new, cheaper technologies come
into being. They include new generations of chips, open-source software and
the always-on connections of the Internet and wireless. Transitions are rarely
smooth, and while some firms are growing fast based on the success of these
new processes, others are falling behind as they struggle with "old IT" or a
combination of old and new. A caveat of note is that the new products are less
expensive for the consumer, which in the short-term, could mean slower revenue
growth and thinner margins. Another explanation for the widely varying tech
results, this one on the macro level, is that since corporate spending has
been relatively tight, growth has once again been dependent on the consumer.
Thus, firms deriving their revenues from the consumer sometimes outpace those
relying on corporate spending. This week's latest readings on personal
spending and first-quarter GDP could help further clarify the picture on the
latter issues.
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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