THE WEEK AHEAD: Playing investor limbo

The limbo game will continue next week as investors and analysts see if another round of tech bellwethers can go even lower than their pre-announcements have predicted. Amazon, Compaq, Lucent and a slew of telecommunications companies are slated to report their quarterly results.

With the exception of Amazon, which actually said it would top previous projections, all major companies reporting this week have already lowered the bar for themselves. All have blamed the insidious economic downturn--something investors will also be scrutinizing as a few key economic indicators are on deck.

The Consumer Confidence report, a key gauge of consumer spending patterns, is due out Tuesday, and a Durable Goods Orders report, which indicates manufacturing activity, will hit the markets on Wednesday.

On Thursday, a report on the gross domestic product--the broadest measure of economic activity and a closely watched inflation indicator--will fill in the week's last piece of the economic puzzle.

These reports are often market moving because analysts and investors use them to gauge whether the Federal Reserve may cut interest rates. But such economic news may garner less attention than usual if last week's surprise interest-rate cut has appeased Fed-watchers for the time being.

• Amazon.com's (Nasdaq: AMZN) quarterly report will be the week's most anticipated report; the company caught analysts and investors by surprise earlier this month after it said it would post a smaller-than-expected loss for the first quarter amid strong electronics sales. The online retailer also reaffirmed earlier guidance for 2001, which had included predictions of a pro forma profit in the fourth quarter. Shares soared 40 percent after the news, and have climbed even higher since.

The news was particularly surprising considering the rumors of bankruptcy that have been swirling since Lehman Brothers bond analyst Ravi Suria issued a report warning that the company's working capital was dwindling and suppliers might refuse to ship items on credit.

The April 9 news did something to quell the credit fears. It also gave clear-cut numbers for the company to measure up to when it reports earnings after the market closes Tuesday. Amazon said it would post a pro forma loss of slightly less than $50 million, or about 22 cents per share. That's much narrower than the 30 cents a share loss analysts had been expecting, according to First Call. The company also gave a revenue projection of more than $695 million, compared with First Call's consensus of $669.58 million at the time.

Analysts have since revised their estimates, but they are still more pessimistic than management. First Call's consensus predicts the company will post a loss of 25 cents a share and revenue of $674 million.

• Compaq Computer (NYSE: CPQ) reports its first-quarter results after the market closes on Monday. The company's report will be closely watched for evidence of whether the PC market has hit its bottom--something that Intel (Nasdaq: INTC) analysts squabbled over last week. Compaq's overseas business will also be scrutinized for signs that U.S. woes are spreading to Europe.

The computer maker warned March 16 that it would miss estimates for the first quarter and cut 5,000 jobs. The company said first-quarter revenue should be between $9 billion and $9.2 billion, below the $9.6 billion previously predicted. Earnings per share are expected to be between 12 cents and 14 cents, flat from a year ago, and below the First Call consensus of 17 cents per share.

The warning came as a surprise to no one. Analysts had already lowered estimates in anticipation of the news. And they lowered the limbo stick again, bringing current First Call consensus to 13 cents a share on profit and $9.14 billion in revenue.

On the positive side, analysts noted at the time that the pre-announcement had already been factored into Compaq's share prices. However, they also cautioned that any weakness in the company's high-end server markets or overseas markets could send them tumbling.

Compaq officials told analysts at the time that they expect to see continued growth in overseas markets. If Europe does slow down, the Compaq numbers could go even lower, Morgan Stanley Dean Witter analyst Gillian Munson said at the time.

• When Lucent Technologies (NYSE: LU) comes out with its second-quarter report before the market opens on Tuesday, analysts will be watching to see if it matches up with their numbers. They'll also be looking for signs that its massive restructuring has started to pay off.

Lucent executives have spent the past few months performing a massive makeover in an attempt to bring the networking company back to its former glory. The company in January announced it would slash 10,000 jobs in an effort to save the company $2 billion in costs. While the company hasn't guided estimates lower for the quarter, it has warned that restructuring won't come cheap. Lucent said it will take a charge in its second quarter of between $1.2 billion and $1.6 billion.

Lucent managed to secure $4.5 billion in new loans in early March to fund its business and avoid the potential reduction of its credit rating to junk status. As part of the loans, however, Lucent must limit its losses to $2.35 billion during the rest of the fiscal year, ending Sept. 30. The company also promised to earn at least $2.2 billion during the 2002 fiscal year--the first solid guidance the company has given in some time.

Analysts will be watching for the company to reaffirm those numbers, as well as live up to the Street's expectations. First Call is expecting a loss of 23 cents a share and revenue of $6 billion.

They may also look for more affirmation that the company is not on the verge of bankruptcy, something Lucent had to deny in April as rumors started to swirl.

• Investors should be apprehensive about telecommunications companies' reports following Sprint's outlook last week. Its report convinced already skeptical analysts that things don't look good for the sector.

"We expect that 2001 will be a challenging year for telecoms," wrote Dresdner Kleinwort Wasserstein analyst Bruce Roberts in a preview of telecommunications earnings.

The analyst trimmed his estimates for the year for the RBOCs (regional bell operating companies), including BellSouth (NYSE: BLS), Verizon Communications (NYSE: VZ) and SBC Communications (NYSE: SBC) , as well as long-distance companies WorldCom, AT&T and Sprint. Roberts suggested most companies would have to lower full-year estimates.

SBC Communications is expected to report earnings of 52 cents a share on Monday.

AT&T (NYSE: T ) and its wireless subsidiary, AT&T Wireless Group (NYSE: AWE), will both report before the market opens Tuesday. Earnings are expected to be 6 cents a share, and a break-even amount, respectively.

Qwest Communications (NYSE: Q) is expected to report a profit of 13 cents a share Tuesday morning, and Verizon Communications is expected to report earnings of 71 cents a share after market close.

Other quarterly reports due out this week include SCI Systems (NYSE: SCI) and EarthLink (Nasdaq: ELNK) on Tuesday, and Macromedia (Nasdaq: MACR), Qualcomm (Nasdaq: QCOM), and VeriSign (Nasdaq: VRSN) on Wednesday.