3 Tech Heavyweights to Miss Earnings Forecasts
Three more high-tech heavyweights warned Thursday that they would not just miss second-quarter earnings forecasts, but miss them by massive margins.
The new numbers released by Advanced Micro Devices, BMC Software Inc. and EMC Corp. were so far below what everyone on Wall Street had been expecting that even the most pessimistic investors were left gasping.
Advanced Micro Devices slashed its second-quarter earnings forecast to just 3 cents to 5 cents, a fraction of the 27 cents analysts forecast, citing pricing pressure in the personal computer chip and flash memory markets.
The Sunnyvale, Calif.-based company also disappointed on the revenue side, saying it now expects sales of $985 million, falling short of analysts’ forecast of $1.08 billion.
AMD shares fell to as low as $24 in after-hours trading from a close of $28.64, off $1.12, on the New York Stock Exchange.
BMC Software, which had been expected to earn between 11 cents and 14 cents a share in the second quarter, said its actual earnings could turn out to be half that, or 6 cents to 8 cents. Analysts were expecting 13 cents.
BMC shares fell 12% to $20 in after-hours trading, from a close of $22.75 on the NYSE, off 86 cents.
Data storage giant EMC said that instead of the 17-cent profit Wall Street was forecasting, it would show earnings of just 4 cents to 6 cents a share.
“It’s time to duck and run,” said a shocked Steve Duplessie, who follows EMC for the Enterprise Storage Group.
“I think any time a company as big as EMC misses as bad as they are missing, it has to have an overall large effect” on the rest of the tech sector, Duplessie said. “It certainly is going to cause the storage sector to go plunging, and my sense is it has enough horsepower to pull the whole tech sector down, and probably the whole Nasdaq.”
“It’s not over yet,” said Bob Austrian, analyst with Banc of America Securities. He said more earnings surprises could be in store for other small software companies, which typically do not close much of their business until the very end of the quarter, and in tough times often lose deals they had been counting on at the last minute.
For EMC, the leader in the fast-growing data-storage industry, the earnings miss offered some troubling signs of how an economic downturn can have a lingering effect. Although data storage remains one of the few high-tech industries in which demand is still quite brisk, the sector has been bruised by aggressive price cutting.
EMC shares fell 16% to $25.29 in after-hours trading, from a close of $30.03, off $1.59, on the NYSE.
Meanwhile, Tekelec, a Calabasas-based maker of phone network switches, testing gear and software, warned after the markets closed that its second-quarter profit would be as little as one-eighth of analysts’ forecasts on lower-than-expected sales.
The company expects operating earnings of 2 cents to 3 cents a share, compared with the 16-cent average estimate of analysts. Revenue should come in at $70 million to $71 million, down from the company’s previous forecast of $88 million to $80 million.
Tekelec shares slid as much as 18% to $20.47 in extended trading, from a close of $24.85, off $1.50, on Nasdaq.
Earlier in the day, WorldCom Inc. reduced its profit and revenue forecasts for the full year, which it said will no longer reflect the company’s stake in a Brazilian telecom firm as well as other factors.
The provider of telephone and Internet services now expects to post operating earnings of $1.05 to $1.10 a share, excluding any impact from its minority stake in Embratel. WorldCom had forecast a profit of $1.21 to $1.31.
The Clinton, Miss.-based company said profit in its second quarter will be in line with estimates.
WorldCom said this year’s results are being hurt by disappointing results at Embratel, as well as costs from a recent debt issuance and the acquisition of Intermedia/Digex.
WorldCom shares fell 19 cents to $14.28 on Nasdaq.
