Earnings: Will Tech Pull Through?

Technology is no longer immune to the weak economy. Still, investors hope reports from Intel, Apple, and seven other titans forecast resilience

A man looks at laptops in the Intel booth at the 2008 International Consumer Electronics Show in Las Vegas. David Paul Morris/Getty Images

by Arik Hesseldahl

Customers at the midtown Fifth Avenue Apple Store look at the MacBook Air in New York City. Spencer Platt/Getty Images

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Though the technology sector is no longer the safe haven it seemed as the economy began stumbling last summer, investors are clinging to hopes that the industry's first wave of first-quarter reports will continue to demonstrate a touch of resilience against the gloom.

Intel: The opening ceremonies, and possibly the fireworks, begin Apr. 15 with Intel's (INTC) results from the first three months of 2008. The semiconductor company rattled nerves Mar. 3 with a warning about weakness in its memory chip business. Revising its profit forecasts downward (BusinessWeek.com, 3/5/08), Intel blamed weak demand at its NAND flash venture with Micron Technologies (MU). As a result, the company said it would be forced to write down the value of its NAND inventory.

Intel also cautioned that its gross margins, a widely watched measure of profitability, would come in at about 54%, down two percentage points from prior forecasts. On average, analysts are expecting Intel to report first-quarter revenue of about $9.6 billion to $9.7 billion with earnings of 25¢ per share. "The question is how much the writedown will affect earnings and whether or not it was enough to allow gross margins to rise for the balance of the year," says analyst Doug Freedman of American Technology Research.

Analysts are somewhat split over what to expect from Intel's computer chip business. Freedman, for example, is expecting strong guidance from Intel on the PC front, whereas Edwin Mok of Needham & Co. says that warnings from Intel rival Advanced Micro Devices (AMD) indicate a weaker than usual environment for computer sales that can't help but hit Intel's guidance going into the second quarter. Chris Danely of JPMorgan (JPM), in a research note issued Apr. 10, said that gains by Intel with PC maker Dell (DELL) were largely offset by losses to AMD at Hewlett-Packard (HPQ).

Apple: Apple (AAPL), which only uses Intel chips in its Mac computers, is expected to report that it sold as many as 2.1 million desktop and laptop machines in the first three months of 2008 when the company posts its results Apr. 23. With consumer confidence sagging, Apple is seen as especially vulnerable. All eyes will be on unit sales of its iPod music players, which have been slowing, and the iPhone, which have been accelerating. For now, analysts are predicting sales of just less than $7 billion and earnings of $1.06 per share.

Research In Motion: It's possible iPhone sales have held up well against the downturn, given the recent strong showing by Research In Motion (RIMM), the Canadian company behind the BlackBerry smartphone. On Apr. 2, Research In Motion reported a healthy surge in sales (BusinessWeek.com, 2/22/08) for its fiscal fourth quarter that ended in early March.

Motorola: There is no more obvious a victim of the success of the iPhone and BlackBerry than Motorola (MOT), which reports its first-quarter results Apr. 24. Analysts polled by First Call expect Motorola to lose 7¢ a share, or nearly $150 million, on $7.8 billion in sales, amid more market-share losses for its cell-phone business. On Apr. 7, the company said it would make peace with activist investor Carl Icahn (BusinessWeek.com, 4/8/08) and accept two of his nominees to the board. That followed news on Mar. 26 that it plans to spin off the once high-flying mobile-device business as an independent company (BusinessWeek, 3/27/08).