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Tech Industry

Tech faring better than other sectors

As the quarter comes to a close, technology companies issue fewer earnings warnings, marking the industry's first key improvement against broader sectors in more than two years.

As the quarter came to a close Monday, technology companies fared better than other industry sectors when it came to trotting out warnings for the upcoming earnings season.

The beleaguered tech sector issued 236 preannouncements in the first quarter, with 117 companies lowering their estimates and 57 raising them. That gave the tech sector a ratio of 2.1 negative announcements for every positive announcement, whereas the broader markets had a 2.9-to-1 ratio in the first quarter.

This shift marks the tech industry's first significant improvement against the broader industry sectors in over two years, said Chuck Hill, research director with First Call, a research firm that tracks company earnings.

The last time the tech sector had a sizable lead against other industry sectors was in the third quarter of 2000. At that time, the tech sector had a ratio of 1.9-to-1, compared with the broader markets of 3.4-to-1.

In sizing up the most recent data, Hill said the tech industry has seen a marked shift but one that does not necessarily translate to an improved outlook for the industry this year.

"In the fourth quarter, tech preannouncements were running about the same as the broader markets overall. Before that, it was much worse for tech; and now we're clearly seeing a change in the pattern we haven't seen for awhile," Hill said.

He noted that while the total number of tech preannouncements in the March quarter were lower than they were a year ago and in the previous quarter, industry watchers and investors should withhold any celebrations.

"The proof is in the pudding, and that won't be known until companies start to report their (first-quarter) earnings in late April," Hill said. "If they start slashing their outlook, that sets the stage for what analysts will say in the third and fourth quarters. But if they maintain their forecasts, then things will be in a hold."