Technology Industry Slows Down Amid Economic Downturn

Strategic Insights -

Evidence of a sharp slowdown in the technology industry emerged yesterday with Intel, Motorola, and National Semiconductor warning they would fail to meet growth forecasts. Analysts at Goldman Sachs also cautioned that Microsoft would struggle to match revenue growth expectations. This downward trend is attributed to a decline in personal computer sales worldwide, partly due to an oversupply of microchips and a slowdown in mobile handset sales. The latest earnings warnings reinforce the unexpected severity of the downturn, with some companies issuing their second caution in a matter of weeks. This comes after Intel triggered the autumn slide in technology stocks with a profit warning in September, and Motorola cut its earnings forecasts in recent weeks.

Key Takeaways:

  • Intel, Motorola, and National Semiconductor warned they would fail to meet growth forecasts, indicating a sharp slowdown in the technology industry.
  • Analysts at Goldman Sachs cautioned that Microsoft would struggle to match revenue growth expectations, despite being Microsoft's main investment banking adviser.
  • The decline in personal computer sales worldwide is attributed to an oversupply of microchips and a slowdown in mobile handset sales.
  • The latest earnings warnings reinforce the unexpected severity of the downturn, with some companies issuing their second caution in a matter of weeks.
  • Intel triggered the autumn slide in technology stocks with a profit warning in September, and Motorola cut its earnings forecasts in recent weeks.
  • Consumer PC sales are traditionally strongest in the final three months of the year, but this year, consumers have been lured by alternative digital gadgets.
  • Over the past week, Apple Computer and Gateway warned of sharply lower demand based on sales over the Thanksgiving holiday.
  • Hewlett-Packard told an analysts' meeting that growth in consumer PC sales, especially in the US, was "decelerating".

Statistics:

  • Intel's fourth-quarter revenues are likely to be unchanged from the preceding three months, compared to predictions of growth of 4-8 per cent.
  • Falling consumer PC demand would shave around $125 million from Microsoft's revenues this quarter.
  • Microsoft shares slipped by $3.50 to $53.19, well below their 52-week high of nearly $120.
  • Motorola's shares fell by less than 1 per cent.

Sources:

  • "Intel, Motorola and National Semiconductor warn they will fail to meet growth forecasts"
  • "Goldman Sachs analyst warns Microsoft will struggle to meet revenue growth expectations"
  • "Apple Computer and Gateway warn of sharply lower demand based on Thanksgiving holiday sales"
  • "Hewlett-Packard tells analysts growth in consumer PC sales is decelerating"