Wall Street Beat: Tech stocks stay aloft, but signals are mixed for 2014
Chip companies look for new opportunities, while the end of XP support and a leveling off of tablet sales could help PC market
Fri, December 13, 2013
IDG News Service (New York Bureau) — Technology stocks are up for the year as shares of many vendors are back to pre-recession levels, but recent company results and market research reports have been mixed, calling into question how some vendors will fare next year.
Though semiconductor industry executives forecast growth for next year, their outlook is more subdued than a year ago, according to KPMG's Global Semiconductor Industry Survey, released this week.
Overall expectations for revenue growth increased slightly, with 77 percent of those polled saying they believe chip sales will increase, compared to 75 percent last year, according to the survey. However, there was a decline in the number of executives expecting growth in excess of 10 percent, with only 16 percent of those surveyed forecasting a double-digit increase, compared to 24 percent last year.
"The decline appears to be linked to several factors, including the slowing growth rates of wireless handsets in many markets increasing the difficulty of meaningful sales expansion," the report said. "Mobility demand remains favorable but the larger customer base is dampening the attractive growth trends semiconductor companies have enjoyed from mobile products in recent years."
The good news is that the 193 semiconductor industry business leaders surveyed agreed that new markets will continue to emerge over the next three years. They foresee less dependence on, for instance, wireless handsets, consumer electronics and computer hardware, with new opportunities the alternative energy, automotive and medical markets.
Increasingly, more chip makers are seeking opportunities for embedded devices in cars and industrial equipment. Chip maker Texas Instruments, facing intense competition in the market for mobile devices, is one of them. Its shares have risen about 40 percent this year. However, this week, in a sign of increasing price competition, it lowered the top end of its outlook for the fourth quarter this year. It now expects revenue to hit a maximum of US$3.04 billion, compared with its prior estimate of $3.10 billion. It also lowered the top end of its guidance for earnings per share, from $0.50 to $0.48.
A lower growth forecast from networking giant Cisco also made headlines this week, when CFO Frank Calderone laid out an updated revenue picture for the company at its annual financial analyst conference.
Cisco is forecasting a compound annual growth rate for sales of between 3 percent and 6 percent for the next three to five years, curbing its earlier prediction of 5 percent to 7 percent. As growth in its core networking business slows, Cisco is trying to expand its portfolio of products to compete in the broader IT market against the likes of IBM and Hewlett-Packard. Cisco is aiming for increased sales in data center and wireless products as well as services.