Analysts' rose-colored predictions

Earnings are expected to increase 27 percent for technology companies in the coming year, according to analysts, but estimates are made to be revised.

CNET News staff
3 min read
Gaze into a crystal ball and you'll find that earnings are expected to increase 27 percent for technology companies in the coming year, according to First Call, which takes a collection of analysts' projections.

That estimate is based on analysts' projections watching the Dow Jones Industrial Average's technology sector companies, said Chuck Hill, a First Call spokesman. But, he noted, that analysts historically have tended to look at companies with "rose-colored glasses."

"Our statistics show that 62 percent of earnings estimate revisions are downward, rather than upward," he said. "Analysts, on average, tend to start out too high with their numbers and lower them as the year goes on to where it's closer to what a company reports."

Nonetheless, here's a snapshot of where some analysts' projections are headed with industry giants in the hardware, software, and Internet arenas.

Dell Computer (DELL), for example, is expected to post earnings of $3.26 a share in fiscal 1998, up from analysts' expectations of $2.57 a share for all of 1997. The mail-order computer maker is nearing the end of its fourth quarter, and analysts expect it to post earnings of 80 cents a share.

Meanwhile, Apple Computer (AAPL) is expected to hit earnings of $2.21 a share in 1998, an improvement over analysts' expectations of 81 cents a share for 1997. The Mac computer maker is finishing out its first quarter for 1997 with estimates at a net loss of 4 cents a share for the period.

Netscape Communications (NSCP) is pegged with earnings estimates of 56 cents a share in 1997, more than double its projection of 31 cents for 1996. Analysts are forecasting Netscape to pull in a profit of 10 cents a share for the fourth quarter this year.

The company's nemesis, Microsoft (MSFT), is anticipated to land earnings of $2.48 a share in 1998, an increase over its expected profit of $2.06 a share for 1997. The software giant is currently expected to earn 51 cents a share in its second quarter.

Networking company Oracle (ORCL) is expected to earn $1.68 a share in 1998, compared with $1.27 per share for 1997. As the company finishes its third quarter, analysts are pegging the company with earnings of 30 cents a share.

Companies are well aware of Wall Street's wrath should their financial performance fall short of expectations.

Computer Associates International (CA) today saw its shares fall as low as 19.8 percent to 49-1/2 a share following the company's announcement that its revenues would come in lower than analysts expected.

Verity (VRTY) faced a similar experience when in its first quarter it said earnings would not meet expectations. The company's stock plummeted to $10 a share from $24 after the announcement.

Verity's chief financial officer, Don McCauley, said in a previous CNET interview that the experience was like "being in a penalty box."

"helvetica"="" color="#CC0000"> Analysts' year-end predictions for the next fiscal year
Earnings estimates given are for the end of one fiscal year from now. Each company has its own fiscal calendar, so some dates will fall in 1997, some in 1998.
Company Symbol Fiscal
Apple AAPL 1998 $2.21
Compaq CPQ 1997 $5.67
Dell DELL 1998 $3.26
Hewlett-Packard HWP 1998 $3.41
IBM IBM 1997 $12.68
Sun Microsystems SUNW 1998 $2.02
US Robotics USRX 1998 $4.43
Intel INTC 1997 $7.82
Motorola MOT 1997 $2.44
Networking (Internet and software)
Oracle ORCL 1998 $1.68
3Com COMS 1998 $3.11
Informix IFMX 1997 $0.98
Novell NOVL 1998 $0.98
Microsoft MSFT 1998 $2.48
Computer Associates CA 1998 $3.11
Netscape NSCP 1997 $0.56
Yahoo YHOO 1997 ($0.15)
Netcom NETC 1997 $4.16
America Online AOL 1998 $0.79
AT&T T 1997 $3.69
Source: First Call