Poor retail conditions have hit technology companies, slashing profits and outlooks for the full year of 2009.
Companies like Sony Corp. (SNE:NYSE), Intel Corp. (INTC:NASDAQ), and Dell, Inc. (DELL:NASDAQ) are all dealing with lower sales and lower profits.
In fact, Sony just announced this morning that the company was pushing back its profitability goals for the next two years, and that the company is expecting a second year of annual losses – “the first back-to-back annual losses in half a century,” reports Bloomberg.
Mariko Yasu for Bloomberg writes, “Sony aims for a 10 percent return on equity by March 2013 from its previous target of March 2011.”
The company hasn’t had a 10% annual return since its fiscal year for March 2008, when it posted record profit.
Sony wants to boost sales in the 3D television market, electronic reading devices, Blu-ray players and game consoles… But the company is also going through a massive cost-cutting program in order to save 330 billion yen, or $3.72 billion, this year through March 2010.
While the company may have already carried out about 80% of those cost reductions, it’s still got some hurdles, and high expectations.
But Sony isn’t the only technology company having retail problems.
Intel Corp. has just been downgraded by Merrill Lynch from “buy” to “neutral.”
Steve Goldstein for MarketWatch London reports, “Intel was downgraded to neutral from buy at Bank of America Merrill Lynch, which cited caution around sector fundamentals and potential risk to estimates from weaker trends in the PC supply chain.”
Merrill Lynch said, “We note that the correlation between Intel’s CPU shipments and PC builds out of Taiwan has stayed relatively high through 2009, in turn suggesting that the current ‘gap’ is cause for concern.”
The broker slashed Intel’s price target from $27 a share to $21.50.
But what about computer supplies?
Forbes’ Oliver Chiang reported yesterday, “Worldwide personal computer shipments are finally up this quarter after six months of decline.”
It may just be the new Windows 7 upgrade from Vista that’s attracting new PC computer buyers. Businesses who hadn’t upgraded their systems to Vista may now be looking to upgrade to Windows 7 operating system, says Richard Kugele with Needham & Co.
But some PC computer companies might not be benefiting from this boost.
In fact, Dell, Inc. has fallen from the top PC maker to No. 3. The company is expecting to see earnings of 28 cents per share versus 37 cents per share a year ago. That’s a $2 billion difference in revenue for the third quarter.
Editor Michael Robinson of BreakAway Investor told his subscribers, “Analysts predict strong sales for the Windows 7 operating system going into the important Christmas selling season for personal computers.”
This might help some PC computer makers next year.
“To boost productivity on a smaller employment base,” says Michael, “corporations will invest in Windows-based technology.”
Large PC computer sales will also help boost chipmakers… And Michael reminds investors that “semiconductor sales have risen for seven straight months and were up 20% in the third quarter.”
If you’d like to learn more about investment opportunities in the technology sector, download Michael’s Special Report on the new undervalued tech leaders.
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