Technology sector under pressure:
The technology sector has received some disappointing news from two major companies Intel and Motorola both reporting dramatically lower quarterly earnings verses a year ago.
Intel reported a 35% drop in earnings coming in at $1.3 billion or 22 cents per share verses $2.0 billion or 34 cents per share in the third quarter of 2005. The analyst’s expectation have been lowered continuously all year and were below actual performance, so Intel beats the Street, but is this really good news? I don’t think so. The price war in the chip sector has been taking a toll and it appears that the pressure may be subsiding but only time will tell. If the US economy continues to show signs of slowing you can bet that prices will continue to fall in an effort to win market share. This has all the indications of a race to the bottom. I would caution investors not to get caught up in this race as nobody wins.
The situation at Motorola was even more disappointing as revenue came in 17% higher and earnings were down 45%. The third quarter results showed earnings of $968 million or 39 cents per share compared to 41.75 billion or 69 cents per share in 2005. The previous year earnings include a gain on the Nextel investment of 39 cents per share. The cell phone market is seeing some of the same pressure as the chip market as over capacity forces prices down and shrinks margins.
For more information go to www.campbellreport.com
Intel reported a 35% drop in earnings coming in at $1.3 billion or 22 cents per share verses $2.0 billion or 34 cents per share in the third quarter of 2005. The analyst’s expectation have been lowered continuously all year and were below actual performance, so Intel beats the Street, but is this really good news? I don’t think so. The price war in the chip sector has been taking a toll and it appears that the pressure may be subsiding but only time will tell. If the US economy continues to show signs of slowing you can bet that prices will continue to fall in an effort to win market share. This has all the indications of a race to the bottom. I would caution investors not to get caught up in this race as nobody wins.
The situation at Motorola was even more disappointing as revenue came in 17% higher and earnings were down 45%. The third quarter results showed earnings of $968 million or 39 cents per share compared to 41.75 billion or 69 cents per share in 2005. The previous year earnings include a gain on the Nextel investment of 39 cents per share. The cell phone market is seeing some of the same pressure as the chip market as over capacity forces prices down and shrinks margins.
For more information go to www.campbellreport.com
posted by Grant | 10:34 AM
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