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S&P 500 tech companies are expected to report a 1.1% Y/Y drop in Q4 earnings, their first...

S&P 500 tech companies are expected to report a 1.1% Y/Y drop in Q4 earnings, their first decline since Q3 '09, per Thomson Reuters. A chip industry downturn, weak PC and home electronics sales, and (important given the company's size) Apple's expected EPS decline are all playing a role. Nonetheless, low valuations for many tech names have attracted bargain hunters; Merrill believes tech stocks are collectively undervalued by 32% on a forward P/E basis, and claims every tech industry outside of IT services is trading at a historical discount.
Comments (3)
  • gmcleod752
    , contributor
    Comments (151) | Send Message
     
    That's a great story. But having worked in the tech industry since 1978, there are wild cards / black swans that show up all the time.

     

    For example high end IT has a big percentage of sales to GOV, Fed, State, County, City. And with the budget problems, states are likely to loose some Fed Funding and it will take them years to recover those lost income streams. With slim margins in most of the tech industry a 15% drop in quarterly sales can devastate earnings.

     

    For example, pc industry. Consumers are sick and tired of buying Windows Based PC's only to toss them in the trash when it takes three to four days to update the widows OS, and doing those endless MS reboots. Apples laptops are too expensive. And for me personally, I'm looking at some dumb down Chrome books to do email / web browsing / basic stuff. And keep my older windows PC laptops off line (so they stop getting virus attacks and those endless Adobe this or that updates). How about some of you analysts dig down into HP / Dell to find out just how many of those annual sales are from people replacing good computers because OS takes too long to reload and update. I think you'd be shocked. I already know the answer to that question.

     

    Before I'd buy Tech, they would have to be substantially below the lower trading band by at least 1/3 and that is with current earnings and not some whatever estimate from some group of wishful thinkers. There would have to be something extremely new that reduces my overhead and wasted time to replace anything I already have. I'm waiting for a heavy hitter like Lenovo with high quality laptops to roll out their chrome book.

     

    I've had it with HP junk and their attempts to add value at the bios level which causes massively fast processors to run like they did 20 years ago. And the printers I've bought from them are no longer reliable and dealing with HP support is a pain. If they are confident in their products how about they provide a 1 year or 3 year warranty versus the 90 days that starts when you place the order.

     

    My Dell Laptops (mobile workstations) run great but I'm not forking out $5K again for a PC.

     

    All my Apple I phones were junk. Bought two, got 3 more during warranty. Att / Apple never solved my communications reliability problems. I now use Verizon and Motorola Droid Razr Maxx, but I am looking a canceling it as I have a hard time justifying $87 per month when I can use a Trac Phone for about $20 per month. The convenience of using the internet while away from my desk is not worth $67 per month. My grand son was given a I pad after they ran that Advertisement with the 5 year old using an I - Pad. He broke the I - Pad in less than 1 minute. Apple gave my son a hard time but finally fixed it. I'd consider buying a tablet only when Panasonic releases their Mid Sized Tough Pad with outside readable display technology, water proof and militarized so I can drop it. That way I can use for nav purposes on motorcycles, my boat, and in the car. That product has some value to me, been waiting for it for two years.

     

    How about a really good home WiFi. All the ones I've tried won't work reliably.

     

    As John Chambers says all the time, and I had to listen to repeatedly while working for CISCO, INTERNET providers are modern plumbers.
    15 Jan 2013, 07:06 PM Reply Like
  • Whitehawk
    , contributor
    Comments (3129) | Send Message
     
    "How about a really good home WiFi. All the ones I've tried won't work reliably."

     

    The best wireless networking system is one custom set up by the home/business owner, given construction specifics and spurious signals (esp in the 2.4 GHz band), all of which usually require custom networking configurations and workarounds unless one lives in a single room structure. A system with 5 routers is not unheard of, along with some thorny links hardwired through ethernet.

     

    P.S. I agree with your skepticism over Merrill's "undervalued by 32%" call. Merrill is likely looking to push supply out the door to the unsuspecting. We need a correction here, not just in tech. Any unconstrained boost from here would be construed as inflationary - also a possibility, but not linked to fundamentals per se.
    15 Jan 2013, 07:35 PM Reply Like
  • gmcleod752
    , contributor
    Comments (151) | Send Message
     
    WhiteHawk.
    Yup, I gave up on the WiFi and hard wired my house with internet ports in all rooms along with internet wires for various sensors. But it would be nice to have WiFi while I am working in the garden. One of my friends buys higher end WiFi units he installs in condo complexes. I might ask him to sell me a down rev unit. There are two extremely great articles by David Moenning from Jan 8 and 9 2013 on Seeking Alpha. I gleaned from these articles that Companies can jack their earnings to just about whatever they want working with Analysts to lower expectations to match, they can play games with the outlook, but the truth is found in real income levels and bookings (when backed up by real orders). My favorite of all is the earnings call when the CEO become their own wild card and comes up with unbelievable future outlooks.
    15 Jan 2013, 08:00 PM Reply Like
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