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We're so focused on domestic recession worries, yet so many of these companies get the vast majority of their revenue from overseas. They're not insulated, since they've all suffered hits one way or another, but there are so many additional factors that investors have to take into account.
Take IBM [IBM
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] for example: yes, there's exposure to financial services since IBM's services business is its biggest revenue generator, but the company is still trading at a 52-week high, it's enjoying big-time sales pops internationally, it's adding $15 billion to its already massive stock repurchase program, and trends are shaping up nicely for the company. So much so that the stock continues to climb today, even though it's a tech company at a year-long high.
Intel [INTC
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] reports Tuesday and there was lots of discussion last week that bad news from Advanced Micro Devices [AMD
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] portended badly for the world's largest chipmaker. But a better way to look at the Intel story is that AMD's news is likely because of its much larger rival, instead of an indication of weakness at its much larger rival. Intel has already issued its margin warning thanks to continued weakness in NAND flash memory.
And that bad news is already baked into shares. The fact is, better than 70 percent of Intel's sales come from international customers. And while we focus on a perceived slowdown in personal computers, Apple [AAPL
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] has become a Top 10 customer for Intel, and it's growing exponentially faster than any other player in the sector. Intel may not release blow-out numbers, but I'm not sure the numbers will be as soft, or the outlook as pessimistic, as some fear.
The net stocks will also get the spotlight with eBay on Wednesday, and Google on Thursday. For eBay [EBAY
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], the new pricing structure will get close scrutiny as well as any comments new CEO John Donohoe might have in regards to competition with Amazon, which seems to be heating up lately. For Google, enormous interest in a new algorithm the company is using that one camp suggests shows a precipitous slowdown in business; but another camp says it's a strong indicator that Google will be able to generate more revenue from every click.
American Technology Research added Google [GOOG
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] to its top list this morning; Pacific Crest Securities says Google's recent sell-off comes from an unrealistic understanding of an industry slowdown; that Google is trading at only 17 times the firm's 2009 EPS estimates and that it's advising clients to snap up shares ahead of Thursday's earnings.
I'll have more to post on each individual company as we get closer to their earnings. But this is just a taste of what's on tap, and why it's so important that investors look at each individual company, rather than as a single basket of tech stocks that should ebb and flow together. Seems like the sector is ripe for opportunity for choosy investors willing to spend some time looking at individual fundamentals.
Questions? Comments?
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