Barring unforeseen disaster, tech vendor shares are set for a strong finish for 2009, but mixed financial news shows that IT still faces hurdles on the way to economic recovery.
Aol, 10 years after its merger with Time Warner, was back in the market on its own Thursday -- and failed to impress. Aol's operating income fell 43 percent this year as it prepared to split from Time Warner, trying to build up a sustainable business through unique content and advertising. Shares declined by US$0.52 to $23.15 on its first day back on the market. Not one research firm that initiated coverage of the stock this week put out a "buy" rating on it. On Thursday, Merriman put a "sell" rating on the stock, while UBS and Broadpoint AmTech had a "neutral" rating.
Shares of networking company Ciena dropped Thursday after it reported wider-than-expected losses for the three months ending Oct. 31. Revenue hit $176 million, up by 7 percent from the prior quarter but nevertheless down from $180 million during the same period in 2008. The company said it lost $26.7 million in the quarter, worse than its $25.4 million loss a year earlier. Company officials voiced cautious optimism.
"From an industry perspective we continue to see some signs of stability, though it's unclear yet the extent to which our customers' 2010 CapEx budgets will increase from 2009," CEO Gary Smith said on a conference call. Ciena shares slipped by $1.51 to close at $11.72.
Meanwhile, Sweden-based networking company Ericsson said Tuesday it looked to further cut costs, laying off about 1,000 employees as it gets ready to launch products that need fewer employees in the manufacturing process. Ericsson last month said third-quarter revenue declined by 6 percent from the prior year, to $6.5 billion.
"Sales of network equipment declined due to lower demand in the current tougher market environment," said CEO Carl-Henric Svanberg in a statement.
The Nordic telecom bellwethers continue to see staff cuts. On Nov. 20, Nokia announced layoffs of up to 330 employees in Finland and Denmark.
While expectations are generally still high that IT will help lead worldwide recovery, inevitably some sectors will lag. The worldwide storage software market experienced another decline in the third quarter of 2009, according to IDC's Worldwide Quarterly Storage Software Tracker Wednesday. The sector generated revenue of $2.87 billion, down 7.9 percent from a year earlier. There was a glimmer of good news: Storage software sales increased 1.2 percent from the second quarter.
"The storage software market was barely able to maintain a positive sequential growth rate in the third quarter of 2009," said Michael Margossian, an IDC analyst, in a statement. "For the second quarter in a row, only two of the top 5 vendors displayed a positive growth over the previous quarter. EMC and IBM displayed positive growth rates of 5.7 percent, and 6.9 percent, respectively."
Texas Instruments, on the other hand, this week reinforced good news about the chip market, raising its guidance for the fourth quarter. The company should generate revenue of at least $2.9 billion, $22 million more than its October estimate. Earnings per share will be $0.47 to $0.51, compared to the earlier range of $0.42 to $0.50, TI said Tuesday. Demand is strong enough to put pressure on inventory, company officials said on a conference call.
The chip industry has not been as badly hit as feared this year, and in a strong sign of returning demand, global PC shipments in the third quarter rose 2.3 percent from the same quarter a year earlier, to 78.1 million units, according to IDC.