Beware This Tech-Tonic Shift In The Global Technology Sector

by Tony Daltorio, Investment U Research

If you’re betting on a recovery in technology stocks based on third quarter earnings reports from companies such as IBM (NYSE: IBM) and Google (Nasdaq: GOOG), you’re not alone.

While economists and commentators debate the issue, many investors have already placed large bets on a V-shaped recovery for the tech sector.

They have some good reason to think so too, since the tech-heavy Nasdaq composite has risen 70% from its March lows. The problem is, they’re expecting “business as usual” in the industry… meaning they think spending will pick up the way it did in the 1990s.

Kris Gopalakrishman, CEO of Indian tech giant, Infosys (Nasdaq: INFY) – a company in the Xcelerated Profits Report portfolio – sees it differently,

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Hewlett Packard’s (HPQ) earnings guidance provided at the analyst meeting for fiscal 2010 was in-line with the Zacks Consensus Estimate of $4.26 per share. The company expects revenue of approximately $117.0 – $118.0 billion, up approximately 3.0% to 5.0% from 2009 estimated revenue. GAAP earnings per share are expected to be in the range of $3.60 – $3.70, a growth of 17% to 20% from 2009 estimated earnings, while non-GAAP earnings per share are expected to be in the $4.20 – $4.30 range. H-P also said the projections were conservative and could easily exceed the company’s forecast. H-P’s guidance validates that the IT industry is expected to return to growth and technology spending will rebound in 2010. Moreover, H-P sees a recovery in its PC business, which will help the company grow its top line as its PC division contributes nearly a third of overall sales....

Commonly seen as a move countering rival Hewlett Packard's (HPQ) acquisition of EDS back in May, this morning Dell, Inc. (DELL) announced it will buy Perot Systems (PER) for $3.9 billion -- $30 per share of Class A common stock. Perot Systems was founded by former presidential candidate Ross Perot in 1988; Perot founded EDS a quarter-century earlier. The price tag amounts to a 68% premium in PER shares from Friday's close, and today the stock is trading accordingly -- up nearly $12 per share so far this morning. As for DELL shares, the tech giant is down over 5% at this point today, perhaps on concerns about the price and/or the nuts and bolts of implementing Perot Systems into Dell's technology services group. It had been increasingly clear that Dell would need to make some sort of move to stay competitive with global ...

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GSI Commerce Inc. (Nasdaq: GSIC), a leading provider of e-commerce and multichannel solutions, today announced a multiyear extension and expansion of its e-commerce agreement with Turner Sports, in partnership with NASCAR. Under the agreement, GSI will continue to provide Turner Sports and NASCAR with e-commerce technology, fulfillment, customer care, catalog services and interactive marketing services, including e-mail.

Hecla Mining Company (NYSE:HL) today reported record quarterly silver production of 3 million ounces for the second quarter of 2009, a 24% increase compared with the same period a year ago. In spite of lower by-product metal credits in 2009 versus 2008, cash

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The first quarter results show the trends the companies will take in the succeeding quarters. Companies will continually lower costs through divestitures and workforce reduction and pay cut. Revenue generation strategies will be consolidation through mergers and acquisition and outsourcing.

General Motors Corporation (Public, NYSE:GM) reported net loss amounting to $6 billion while Ford Motor Company (Public, NYSE:F) with only $ 1.4 billion which was better than analyst projection. Similar with the automotive industry, the technology industry was also dominated by major losses. Hewlett-Packard Company (Public, NYSE:HPQ) reported a 3percent decline in revenue of $27.4 billion, so did Lenovo Group Limited (ADR)(Public, OTC:LNVGY) with a quarter loss of $264 million. Outsourcing providers were no exceptions as well; Convergys Corporation (Public, NYSE:CVG) with $21 million loss and TeleTech Holdings, Inc. (Public, NASDAQ:TTEC) with 8 to 10 percent decline in revenue.

However, there

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Investors active in the IT sector were shocked on the morning of 3/18/09 as they awoke to news that International Business Machines [IBM: 91.95, 0.00 (0.00%)] is working to make its largest acquisition ever when the offered to buy Sun Microsystems [JAVA: 8.89, 0.00 (0.00%)]. The important thing to consider here is whether this aligns with IBM’s overall strategy and reinforces their competitive edge over the likes of Hewlett-Packard [HPQ: 28.99, 0.00 (0.00%)], Cisco [CSCO: 16.50, 0.00 (0.00%)], and Oracle [ORCL: 15.83, 0.00 (0.00%)]. So where do I stand on this acquisition, after all, don’t acquisitions destroy shareholder value? Initially, one could say that this is a terrible move for IBM. Who wants a company that posted a loss per share of -$2.40, and has been unable to shake off

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Hewlett-Packard Company's (HPQ) results were below expectations and the company has lowered guidance for the 2nd quarter and full year 2009. Non-GAAP earnings were at the low end of guidance. As we had mentioned, slow PC sales had a negative impact on printer sales and printer supplies.The company has cut 9,000 employees and further cuts are expected.The acquisition of EDS has depressed margins, and we expect this to continue.We expect the poor results to continue through the 3rd quarter. In our opinion, visibility is poor through the 4th quarter and into 2010. We do not know the actual cash impact of severance pay, and this will impact the difference between GAAP and non-GAAP results.Read the full analyst report on HPQ "HPQ" Free Stock Analysis: Buy? Sell? Hold?Zacks Investment Research

Hewlett-Packard (HPQ) shares were off by almost 8% Thursday; a day after the technology giant announced a tough quarterly report that included softer-than-expected sales and a reduced annual guidance.

Earnings estimates for this fiscal year, ending in October, have declined by 2 cents in the past 7 days.

Net revenue in the fiscal first quarter came to $28.8 billion, which was 1% better than a year earlier, or 4% better when adjusted for the effects of currency. The result fell short of analyst expectations.

Excluding items, HPQ earned 93 cents per share, which matched the consensus.

Revenue for its Personal Systems Group and Imaging & Printing Group each declined by 19%, while revenue for Enterprise Storage & Servers dropped 18%, HP Software declined 7% and HP Financial Services dipped 1%. The company’s Services revenue was able to climb 116% thanks to the EDS acquisition.

Expecting that fiscal first-quarter

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S&P Analyst Thomas Smith rates HEWLETT-PACKARD SHARES a STRONG BUY:

HPQ posts July-quarter operating EPS of $0.86 (GAAP $0.80), vs. $0.71 ($0.66), $0.01 above our estimate. Revenue rose 10%, aided by growth in all segments and currency effects. PC unit shipments grew 20%, which we believe indicates market share gains. HPQ expects to close its pending acquisition of tech services provider EDS (EDS; 24.81) shortly. We believe the deal has the potential to broaden revenue sources. We are raising our fiscal year 2008 (October) EPS estimate to $3.63 from $3.60, and keeping fiscal year 2009’s at $4.05. We are maintaining our p-e based 12-month target price of $61.

S&P Analyst Scott Kessler rates EBAY STRONG BUY:

EBAY announces it is reducing most U.S.-based fixed-price listing fees to a flat $0.35 from $0.15-$4.00, and changing the duration to 30 days from 7 days, effective Sept.

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Reporting revenues of just over $2 billion in its fiscal third quarter (ended July), Hewlett-Packard (HPQ) demonstrated strength in its laptop sales.  Results moderately beat analysts' estimates, marking the fourth consecutive quarter HP has moderately beaten estimates.

In pre-market trading, HPQ shares are up 3.5%, or about $1.50 per share.  Will bargain-shopping traders keep HP buoyed throughout today's trading, or will the acknowledged headwinds Hewlett-Packard will be facing in upcoming quarters keep downward pressure on the share price?

Analysts in general have been quite dormant in earnings estimate revisions for the past several weeks.  This speaks to the relative steadiness of how HP has run its business, though Zacks senior technology analyst Steve Biggs, CFA had earlier this week downgraded HP shares (click here to access report) from Buy to Hold:

"First, HPQ's acquisition of EDS should close shortly, [which] adds a slower growth company to its revenue base. Next, although

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