Earnings season is here again, but this could be the turning point.
As Orange County’s technology companies prepare to report earnings for the June quarter in coming weeks, analysts and investors are hoping for clues to a key question: Even if earnings come in as poorly as expected, will the outlook for the next six months be bad, too?
At least the initial evidence seems to suggest the news can’t get much worse.
At the close of the March quarter, nine of OC’s top tech companies warned that they wouldn’t meet the guidance they had given to Wall Street. So far, only four,Broadcom Corp., Ingram Micro Inc., Powerwave Technologies Inc. and Rainbow Technologies Inc.,have sounded alarm bells about the June quarter.
Of course, other tech companies still have time to warn. But some of those that already have offered comments about the quarter have couched them with an expectation,that the worst may be just about behind them.
Irvine’s Epicor Software Corp., for one, said last week it expects software licenses for the June quarter to slightly exceed the company’s earlier estimates.
“Business for the second quarter just ended improved vs. the first quarter,” said Epicor Chief Executive George Klaus. “We believe the worst of the economic downturn is behind us.”
Epicor’s outlook for the second quarter is in sharp contrast to the first quarter, in which the company lost $22 million and saw sales slip 17% to $47 million.
Analysts expect some other OC tech companies to report decreased losses or yearly gains. Lake Forest-based disk drive maker Western Digital Corp., which has been in the thick of a corporate restructuring, is expected to report a loss of 7 cents per share for the June quarter, vs. a 19 cent loss a year ago, according First Call/Thomson Financial.
Storage components maker QLogic Corp. is actually expected to report an increased profit,23 cents per share, up from 21 cents a year ago, according to analysts.
There’s even consolation for one of tech’s hardest hit sectors: semiconductors.
“Of importance is the observation that the September quarter is likely the bottom for semiconductor revenue, followed by modest recovery in the calendar fourth quarter,” said JP Morgan H & Q;’s Eric Chen in a report. “Equipment shipments will likely bottom in the calendar third quarter, followed by very mild recovery into 2002.”
In the meantime, though, Irvine chipmaker Broadcom Corp. says it’s still in the thick of it. Last month, the company warned that second-quarter earnings would decrease by 32% to 35% from the first quarter. Also last month, Broadcom followed through on an earlier promise to lay off engineers, marketers and other workers companywide.
Still, the company offered a glimmer of optimism in its warning: “Although current demand conditions continue to be soft, we are starting to see some signs of stabilization in the business for the second half of the year,” said Henry Nicholas, Broadcom’s chief executive.
Analysts expect Broadcom to report a second quarter loss of 16 cents a share compared to earnings of 23 cents in the same quarter last year, according to First Call.
Newport Beach-based Conexant Systems Inc. hasn’t warned about its results for the recently finished quarter. But most analysts already have lowered their revenue expectations for the company after it warned about the March quarter. At that time, the company said it planned to lay off 1,500 workers and cut executive pay.
Analysts expect Conexant to lose 43 cents a share for the June quarter, compared to earnings of 23 cents in the year-ago period.
Other OC tech companies say they are straddling the line between profits and losses for the June quarter.
Demand for Ingram Micro Inc.’s technology distribution services has slipped, taking the company by surprise, according to Chief Executive Kent Foster. As a result, the company said it could either break even or lose up to $10 million for the second quarter.
“Until recently, the dramatic softening of demand for information technology products had been limited primarily to the U.S.,” Foster said in a statement. “As many leading technology companies reported in the last few weeks, the decline in (technology) spending has spread to Europe and other parts of the globe.”
Executives at Irvine security software and hardware maker Rainbow Technologies initially had estimated the company would break even in the second quarter. But they recently changed estimates, projecting a loss of 6 cents to 9 cents per share for the quarter.
Analysts project Rainbow to report a loss of 7 cents per share.
Similarly, Santa Ana-based wireless components maker Powerwave Technologies said its sales will be between $70 and $80 million, compared with $73 million in the first quarter. Still, the company said it expects a narrower loss than the 15 cents it reported in the first quarter. Analysts estimate the company will report 8 cents per share in red ink for the second quarter. n
