Asia takes knock as US tech giants disappoint

Chief Executives Terry Semel (Yahoo!), left, and Paul Otellini (Intel). Picture / Reuters

Weak results from technology leaders Intel and Yahoo! are expected to mean bad news for global sharemarkets, raising concerns that tech spending this year could be less than expected.

Intel, the world's largest chipmaker, and internet media giant Yahoo! posted results that did not meet expectations, sending shares of both sharply lower and hitting stocks across the sector.

Shares of other marquee tech names also fell: Google shares fell 3.4 per cent, Apple Computer nearly 2 per cent, Dell 3.6 per cent and eBay 3.1 per cent, all in after-hours trade.

The first impact outside the US was seen in Asia, where shares of major chip-related stocks fell across the board yesterday as investors fretted about the disappointing results from Intel.

According to Reuters Estimates, the first 49 companies of the S&P-500 that have reported fourth-quarter results have so far collectively missed average Wall Street revenue estimates by 0.25 per cent.

Intel suffered from weak demand for processors used in desktop computers and weak sales in the Americas. Revenue at Yahoo! was just below expectations, with higher operating costs crimping profit growth.

"The worry with Intel is many investors are expecting higher corporate spending to offset potential weakness in consumer spending for GDP growth this year," said Steve Neimeth, portfolio manager for AUG SunAmerica Asset Management in Jersey City, New Jersey.

"If Intel's miss is due to lower corporate spending, this could bode very poorly for economic growth in 2006," he said.

IBM, the world's largest computer maker and computer services provider, for its part posted a quarterly profit that rose a higher-than-expected 13 per cent, aided by its consulting business and sales of large computers to businesses.

"In light of Intel's very disappointing earnings, it makes IBM's numbers look that much better and makes it look like a possible safe haven for tech investors," Neimeth said.

Even so, IBM shares fell 1.3 per cent in extended trade.

Including Tuesday's after-hours drop, shares of Intel are up about 2.5 per cent in the last 12 months. On the same basis, IBM stock is down about 13 per cent and shares of Yahoo! are little changed over the past 12 months.

Several financial analysts said the Yahoo! earnings shortfall - it missed the average estimate by a penny - reflected flat growth in gross margins and higher than expected operating expenses. Chief financial officer Susan Decker said expenses were up as the company invested in high-growth areas.

Yahoo! shares have also been weighed down by competitive concerns over the faster growth of rival Google and the imminent loss of key advertising customer Microsoft, which is gearing up to compete more actively itself in online ads by the middle of this year.

And in Intel's case, due partly to the earnings miss, chief executive Paul Otellini said the company would stop issuing mid-quarter updates. Intel missed its own forecast it gave in mid-November, reporting revenue of US$10.2 billion ($14.94 billion), compared with its forecast for US$10.4 billion to US$10.6 billion.

"We're starting out in a bit more of a hole for 2006 than we first had thought. We hope to capitalise on any revenue opportunity and a lot will depend on the product," Otellini said.

- REUTERS