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IBM and Sun Results Spark Global Tech Stock Plunge

Posted on: Saturday, 16 April 2005, 06:00 CDT

FOUR of the world's leading technology companies saw billions of dollars wiped off their values yesterday after they stunned markets from Tokyo to New York with a series of dismal results.

IBM and Sun Microsystems started the dive with after-the-bell results on Wall Street on Thursday night. When the Nikkei opened yesterday for trade in Japan, Samsung Electronics, the maker of chips and consumer devices and the most valuable technology firm outside America, unveiled a 52 per cent slump in earnings for the last quarter.

Then at lunchtime in Stockholm, Sony Ericsson shocked markets by announcing a 20 per cent slump in its quarterly profits. The announcements followed poorly-received figures from Apple on Wednesday and sent Asian stock markets tumbling.

Among those to feel the backlash in London was Sage Group - the only technology stock left in the FTSE - which lost nearly 2 per cent of its market value. It sells accountancy software to small and medium-sized businesses, which are most likely to feel the squeeze from any downturn.

Investors often view the technology sector as reflecting the health of the global economy as a whole as firms invest in hardware and consumers splash out on electronic goods when they are confident about the future.

Sony Ericsson, known for its snazzy high-end market phone offering, blamed a shift to cheaper, pre-paid handsets for its slump in earnings as an overhang of stock from the end of 2004.

The company said: "The decrease in average selling price was partly due to the general market conditions outlined above, but also because the product line-up was mature and few new products were launched during the period."

The fallout caused bourses across Europe to slide and hit mobile phone sector leader Nokia as well as Ericsson, joint owner of Sony Ericsson with Sony. When New York opened, IBM and Sun continued their dive. At one point IBM was down over 7.8 per cent and Sun over 7.5 per cent.

The news also hurt other Dow Jones and Nasdaq hi-tech listings. Hewlett Packard fell 3.4 per cent and Cisco slipped 3 per cent. "The IBM announcement caused people to sell at the open. This is a white- knuckle time," said Jon Brorson, at analysts Neuberger Berman.

"The smart money is moving out of technology in general," said Mark Herskovitz, of US investment firm Dreyfus Premier Technology Growth Fund. While Cummins Catherwood at Walnut Asset Management, said: "Maybe this is a large canary in the coal mine saying, 'maybe we're really having a slowdown'."

Source: Scotsman, The

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