Earnings season got off to a rocky start last week for the tech sector.
"The basic problem is expectations have to come down about earnings and
economic growth," said Michael Metz, chief investment strategist at
Oppenheimer & Co., to Reuters News. "In my judgment, the market is in the
process of making that adjustment." Chip stocks were overall a major
disappointment last week. Sentiment toward the group was marred by a Merrill
Lynch downgrade on the sector, as it believes the shares offer no upside from
current levels. Despite nearly doubling its quarterly profit, Intel slashed
its profit margin forecasts and said that inventories rose. "The tech market
is just getting hit really hard [on Wednesday]. It's obviously all Intel,"
said David Memmott, head of listed block trading at Morgan Stanley, to Reuters
News. "We're in the beginning of this quarter's earnings, and so far, they
haven't been very good." Intel also had a hand in Advanced Micro Devices'
downfall. Some investors are worried about AMD's vague third-quarter outlook
and the possibility of imminent pricing pressures from Intel Corp. Still,
Rambus and Cypress Semiconductor jumped, as investors cheered their respective
quarterly reports. Within the communications equipment space, Juniper Networks
rallied on its quarterly profit that beat expectations. Nokia plunged on a
warning its third-quarter earnings and sales will decline as it trims prices
in the face of steep competition. Still, computer stocks were a bright spot.
International Business Machines and Apple Computer both advanced on their
robust quarterly results, while Dell boosted its second-quarter earnings
forecast, sending that stock into the black. As the earnings parade continues
this week, with results due from Sun Microsystems and Microsoft, hopefully
tech earnings will fall more in line with investors' high expectations.
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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