Applied Materials Inc, Dell Computer Corp and Hewlett-Packard Co will report lower profit this week on slowing sales, and investors say they're watching the reports for early signs of a computer-industry recovery.
With quarters that end a month later than those of rivals, top chip-equipment maker Applied, computer makers Dell and Hewlett-Packard and testing-tool manufacturer Agilent Technologies Inc will show weeks of sales competitors haven't yet disclosed.
These off-calendar quarterly reports give shareholders insight into how the period is progressing for the rest of the industry. Though investors say the companies may have bad news about the current period, they're hoping executives will give a clearer idea of when demand for chips, computers and related gear will rebound after a slump that's lasted almost a year.
"They're probably going to say positive things for the future, whereas the present still looks pretty dismal," said Michael Cohen, manager of the Alpha Analytics Digital Future Fund.
"We were hoping this quarter would be the bottom. Now, it looks like maybe next quarter." Demand for computer-related products hasn't bounced back after a dismal holiday shopping season last year, as consumers and corporations put off purchases because an economic slowdown has raised concern about spending.
PC shipments in the calendar second quarter dropped from a year ago for the first time since 1986, and analysts expect chip sales to have their worst decline in history this year.
Applied, the biggest maker of semiconductor-manufacturing tools, said in May that it would break even in the fiscal third quarter or report a slight per-share profit, falling short of previous analyst estimates for earnings of US$0.22.
Many chipmakers such as Micron Technology Inc lowered spending plans further in recent months as sales continue to drop, and analysts expect Applied executives to make cautious statements about new orders for the next quarter or two.
Applied is likely to announce 2,000 to 3,000 layoffs from its 16,000-person workforce, Banc of America Securities analyst Mark FitzGerald said.
"It's somewhat of a mess out there right now," FitzGerald said. "Applied is testing the water for a second-half recovery, but the chances for that are slim to none." The Santa Clara, California-based company today will report earnings of US$0.03 a share on sales of US$1.25 billion, the average analyst estimates in a Thomson Financial/First Call survey. A year ago, Applied earned US$0.70 on sales of US$2.73 billion.
Hewlett-Packard, the second-biggest computer seller and the top printer maker, will report lower sales on Thursday. The company said last month that fiscal third-quarter sales would fall 14 percent to 16 percent from a year earlier.
"The greatest source of weakness is consumer spending," Chief Executive Carly Fiorina said at the time. "That's true around the world." The Palo Alto, California-based company will report earnings of 4 cents a share on sales of US$10.23 billion, according to First Call. A year earlier, sales were US$11.8 billion, with profit of US$0.49.
Dell's sales have fared better. The company has slashed prices on its personal computers to boost sales and take market share even as demand dropped industrywide. That strategy seems to be working, ranking Dell as the biggest PC maker in the past two quarters, topping Compaq Computer Corp.
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