Profit warnings down for quarter

Fewer tech companies are on track to post earnings surprises than the previous quarter, when a record number of companies issued warnings.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
2 min read
As the current quarter comes to a close, fewer tech companies are on track to post earnings surprises than the previous quarter, when a record number of companies issued preliminary warnings to Wall Street that their results would fall short of expectations.

"A lot of tech companies, especially semiconductor companies, cited problems with Southeast Asia last quarter, and we're not seeing much of that this quarter," said Thomas O'Keefe, a research associate with First Call.

Last quarter, 242 technology companies gave analysts guidance on how the coming quarter was shaping up. Of that group, 175 companies--72 percent--warned that their next quarter would be worse than analysts had expected.

Only 35 companies out of that group--14 percent--said their results would beat Wall Street's expectations, O'Keefe said. The remainder of the companies maintained that analysts' expectations were on track.

Contrast those figures with the current quarter, for which only 83 companies so far have issued guidance to Wall Street.

Of the current group, 50 companies--or 60 percent--have said that their financial outlook is bleaker than expected, while 17 companies--or 20 percent--have indicated that their quarterly performance is on track to beat analyst estimates.

"Last quarter was by far the largest quarter for guidance," O'Keefe said. "I don't think the current quarter will match the previous quarter. I think we absorbed most of the problems in the second quarter."

O'Keefe said it is unlikely that the number of companies issuing guidance to Wall Street will hit the mid- to high-100 range, even though several still are suffering the effects of Asia's economic crisis.

Some exceptions include telecommunications equipment maker Alcatel, which today warned that its performance for the coming quarter and year will be hurt by the economic turmoil in Southeast Asia and Russia.

Last month, semiconductor company LSI Logic warned that its third-quarter performance would fall short of analyst expectations, largely due to a global economic slowdown.

One company that has given guidance that its upcoming quarterly results would be better than expected is Intel. Last month, the chip giant said stronger-than-expected demand in North America and Europe would bring in higher-than-anticipated revenues.

"We still have another two to two and a half weeks left before the companies begin reporting [quarterly results], so I could see another 20 more or so coming in with guidance until then," O'Keefe said.

Companies typically begin issuing preliminary warnings a month before the quarter ends, and continue doing so up until the day before they formally report their financial results.