IT Vendors Feed Wall Street Optimism
Though virtually all IT vendors say they'll face a tough sales environment over the next few quarters, a range of companies including IBM, Intel, CA and even financially beleaguered Nortel offered some hopeful words this week.
Fri, May 15, 2009
IDG News Service — Though virtually all IT vendors say they'll face a tough sales environment over the next few quarters, a range of companies including IBM, Intel, CA and even financially beleaguered Nortel offered some hopeful words this week.
At a meeting with analysts Wednesday, IBM officials were positive about prospects for the rest of the year, saying they should be able to meet financial goals and generate earnings per share of US$9.20, a healthy jump from $8.89 last year. IBM also said EPS should be in the $10 to $11 range next year.
Company CEO Sam Palmisano stressed in his presentation that it has been "a good year in a difficult environment."
"The analyst meeting highlights the company's ability to absorb incremental macro weakness and still drive earnings," said Goldman Sachs analyst David Bailey in a research note.
Palmisano ascribed the company's relative good fortune to its product mix, heavily weighted toward software and services. Only 10 percent of IBM's sales comes from hardware, typically the first item cut from tech budgets in tough times.
IDC said in a report Tuesday that inventories of semiconductors are high, since demand for most categories of computers has slowed. Shipments reached around 65 million during the first quarter, a 13 percent year-over-year decline and a 10.9 percent sequential drop from the fourth quarter last year.
Intel, however, offered a ray of light at its own analyst meeting Tuesday. CEO Paul Otellini said orders have been "a little better than expected" this quarter.
Intel could use a boost. After five quarters of falling market share, Advanced Micro Devices gained market share at the expense of Intel in the first quarter, IDC said in its report. AMD's share of global processor shipments reached 22.3 percent, a 4.6 percent jump from the fourth quarter last year.
To make matters worse for Intel, on Wednesday the European Commission announced it had found the chip maker guilty of antitrust violations and fined the company €1.06 billion ($1.44 billion). The main issues under review related to payments of rebates to system manufacturers in order to stifle competition from AMD.
Intel investors appeared to take the news in stride. Shares of Intel closed at $15.13 Wednesday, down by $0.08, but bounced back to $15.54 Thursday.
Trading in IT shares was somewhat volatile this week, but on the whole technology companies have made a huge comeback on the markets since March 9, when the tech-heavy Nasdaq hit 1268.64, its lowest close since October 2002, near the trough of the dot-com bust. The Nasdaq was at 1676 in midafternoon trading Friday.
