Tech Sector Waiting to See Earnings Improvements
DEBORAH MARCHINI, CNN ANCHOR: Well, bargain hunters helped to lead a recent rally for tech shares, but market watchers say the sector can't really recover until its earnings do. Bruce Francis has more.</s>BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): The bottom for tech stocks has been hard to spot, and it will remain elusive, analysts say, until tech earnings stop their decline and turn around.</s>ASHOK KUMAR, US BANCORP PIPER JAFFRAY: There is an increased possibility that instead of a recovery in the second half of this year, we could be looking into a recession and if that's the case, we have not seen the worst of the stock market.</s>FRANCIS: The tech earnings outlook continues to get dimmer. According to First Call, tech company pre-announcements are running 77 percent ahead of the fourth quarter's record setting pace and 81 percent of those pre-announcements are negative, also a record. Those warnings are cutting deep into projections. Originally, analysts expected first quarter tech earnings to increase 4 percent. Now, they are expecting a huge 32 percent decline. For the second quarter, projections for a 2 percent increase have turned into a 30 percent decline. For the third quarter, an 11 percent increase has turned into an 18 percent decrease and it gets worse.</s>CHUCK HILL, FIRST CALL/THOMPSON FINANCIAL: In the last two weeks it's spilled over into the fourth quarter. I mean, just in a couple weeks, we've gone from 15 percent growth expected in the fourth quarter down to 6.</s>FRANCIS: With timid consumers and corporations and tapped out telecoms and dot-coms, tech spending is in the doldrums.</s>HILL: So whether the Fed does a half a point or three-quarters of a point is immaterial to these kind of problems.</s>FRANCIS: Another layer of concern for tech companies, the strong dollar, which makes high-tech exports pricey just where tech companies are looking for growth.</s>KUMAR: For companies such as Intel and Compaq and Dell and a lot of the large IT companies, they get over 60 percent of their revenue from international market. To Europe, represents 40 percent of the revenue mix and then Japan and Asia Pacific's, all those currencies are weak against the dollar.</s>FRANCIS (on camera): As for Intel, Kumar believes that the chip giant won't reach its 1999 revenue levels until 2003. Bruce Francis, CNN Financial News, New York.