Another earnings season is on us, and with the obligation to report business results, many executives also play the part of macroeconomic forecast gurus. As the reports start to pour in by the hundreds, it's not hard to piece together a global business forecast, sector by sector. So here's how the world looks through the eyes of a technologist, for example.
Early shots
IBM (NYSE: IBM) led off a week early and talked up its global reach, all while staying conspicuously quiet on domestic prospects. I was moved to infer that other multinational giants would soon follow suit, an armada of schooners floating on a rising tide of global IT infrastructure spending. And then the dominoes started to fall into place.
Texas Instruments (NYSE: TXN) showed us good numbers and another optimistic outlook. Then the AMD (NYSE: AMD) and Intel (Nasdaq: INTC) processor duopoly both said that they felt fine and didn't see any slowdown coming down the order pipeline, but that the economy still merits a watchful eye.
The new news
That brings us all the way to last night, when a veritable chorus of companies large and small issued their statements. Software giant Microsoft is doing fine, thank you very much, because management still expects 11%-12% higher PC sales next year -- driven by "strength in emerging markets" in the words of CFO Chris Liddell.
And Sun Microsystems (Nasdaq: JAVA) CEO Jonathan Schwartz weighed in on pretty much the entire economic spectrum: "Financial services companies you see in the press are the most conservative right now about their IT budget. On the other hand, we also serve communications companies, network service companies, retail companies -- many of whom are seeing sharp growth." Again, his company is happy about the near future and wouldn't really change a thing.
Finally, from a very different segment of the technology sector come two sobering notes. KLA-Tencor (Nasdaq: KLAC) and Lam Research (Nasdaq: LRCX), two providers of semiconductor manufacturing equipment, say that they are seeing customers step down their infrastructure investments. That could be a sign of slower growth a couple of quarters out, so these guys provide a mellowing frame for what the big boys are saying a couple of steps up the food chain.
What it all means
Put it all together, and nobody in technology has much of a reason to complain right now -- but there could be a break in the hardware explosion at the tail end of the year, which by all rights should be followed by a cooler software trend, too.
In other words, this would probably be a good time to jump in and snag a few tech stocks on sale. They have been declining en masse on recession fears since last fall, and now some of the finest operations in the world can be had at quite a discount. See, Mr. Market is a moody fellow who tends to overreact to both the good signs and the bad. And he's terribly shortsighted.
The near-term positives that just started to trickle in will almost certainly be reinforced by the untold masses of upcoming earnings reports and the attendant guidance speeches. We have enough evidence already to make that call right now. The stocks will heave upwards, as if the whole sector were sighing in relief with the trend lines on its chest.
And then, it will exhale. The long-term reality catches up with short-term positives, and even the massively insulated IBM and Microsoft will feel the effects. By then, it'll be late 2008 or maybe a bit later than that, and some other segment of the market picks up the slack. So it goes in the ever-changing and massively complex experiment in mass psychology and efficient markets that is the global economy.
Ride the lightning. Enjoy it when you can.
Further Foolishness:
