Despite mixed corporate results and outlooks, the tech industry
outperformed the broader market last week, possibly starting a recovery from
last month's weakness. Looking ahead, Cisco Systems and Dell could be this
week's drivers for the sector. For the most part, analysts seem to expect
Cisco to deliver in-line results and provide a healthy outlook for its July
quarter, which tends to be its strongest due to seasonality. Meanwhile, Street
pundits appear confident that Dell's results and guidance will also match
expectations. While in-line results do not appear to be strong catalysts, they
could push investors to pick up Dell shares that have felt pressure recently,
noted CIBC World Markets. So why such modest expectations instead of bets that
firms will handily beat estimates? Recent disappointments and warnings,
seasonality and economic deceleration may be among the culprits. Thus, this
week's reports on retail sales, the trade gap and business and wholesale
inventories will be closely watched. In addition, Street players appear
increasingly prudent, as also signaled by rocky IPOs that are often priced at
the lower end of the expected range and by shaky debt offerings, notably in
the auto sector, but that could mushroom elsewhere, according to some experts
talking to The Wall Street Journal. There may be a silver lining to analysts'
apparently modest expectations. Talking to BusinessWeek, author Jeremy J.
Siegel explains that following historical research from 1967 onward of all S&P
500 firms, focusing on sales growth in the prior five years and stock
performance onward, the fastest-growing firms had the worst subsequent
returns, versus the S&P 500 index, whereas the slowest-growing firms had the
best returns. The fast-growing firms did not stop growing quickly (on the
contrary), but investors paid too high a price for growth. In sum, it's back
to the basics again--forget the hares, and bring on the turtles!
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
back to top
