Blue chip tech company earnings are as close as you get to a one-stop shop for gauging global economies and the collective stock market "mood". Tech products have little to no shipping costs, are sold all over world, and touch a broad base of demographics. Traders spend entire quarters coming up with theories and hypotheses as to what's happening in the world and how to play it. Earnings season is when they get their report cards.
IBM's (IBM) report confirmed much of what the macro data was telling us about the second quarter. Big Blue beat on EPS by the hair of it's teeth as business spending held up reasonably well. "Reasonably" in this case meaning only that IT budgets weren't completely frozen. Currency cost the company $1 billion on the top-line as was expected. The BRICs are still growing but not much, Europe is a disaster (down 9%) and the America's are almost perfectly flat.
Intel (INTC), EMC Corp. (EMC) and VMware (VMW) all said much the same thing.
According to Zachary Karabell, president of RiverTwice Partners, Big Cap Tech is "telling us what we thought but with a positive edge." The present isn't great but Doomsday has yet to arrive and the sky remains aloft. Bears can and certainly will complain about the quality of the numbers but that's to be expected. Karabell says the earnings reports are showing "even in a really troubled time a lot of these companies are more than capable of growing substantially".
As for perennial tech punching bags like Advanced Micro Devices (AMD) and Nokia (NOK) their disastrous quarters were certainly caused in part by a weak global economy. But their relative failures isn't new. The bifurcation between the haves and have not's isn't a function of last quarter but rather the last few years, according to Karabell. It didn't only just now become apparent that Intel is a more resilient, generally better company than AMD.
There's a case to be made for the end of days but Karabell isn't making it. "I would much rather place my bets, figuratively, literally, metaphorically on the mantra that we're actually creating a world that's going to grow and expand with stops and starts," he says.
Radical thinking for sure, but that's what it looks like based on what we've heard from tech so far.
