Transcripts

Techs Are Poised To Be Great in 2008

PAUL KANGAS: Also moving higher today, shares of IBM. They jumped more than 5 percent to $102.93. Big blue surprised Wall Street with a better than expected preview of quarterly earnings, a sign that businesses are still spending money on technology. IBM posted preliminary fiscal fourth quarter earnings of $2.80 a share. That's up 24 percent from the year ago period and $0.20 ahead of analyst estimates. IBM's revenues jumped 10 percent to nearly $29 billion during the quarter. The tech giant also noted its cash balance as of the end of 2007 was just over $16 billion. More details on the quarterly and full year results are expected Thursday, when IBM holds its regularly scheduled earnings web cast.

SUSIE GHARIB: That rally in IBM today lifted the entire tech sector, which has been struggling in 2008. But as Erika Miller reports, there's still optimism about the outlook for tech's performance this year.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Today's jump in tech stocks is a ray of hope for the worst performing sector so far this year. The question is will the rally have staying power? The NASDAQ is still down 6.5 percent since January 1, far more than the losses in the Dow and the S&P 500. Some analysts say part of the tech sell-off is simply profit taking after a stellar 2007. But Cowen's technology strategist Arnie Berman blames worries about the U.S. economy.

ARNIE BERMAN, CHIEF TECHNOLOGY STRATEGIST, COWEN & CO.: I think that as we've gotten to this year, a little bit of reality has started to set in, where investors have started to appreciate the fact that technology stocks are also always cyclical. There is nothing about a slowing economy that you can ever say is good for technology companies.

MILLER: Investors are also increasingly questioning Wall Street's bullish earnings forecasts for the group. According to Thomson Financial, analysts are predicting 18 percent profit growth for techs this year, on par with 2007's expected results. Part of that optimism is due to the fact that technology companies get much of their sales overseas, where growth remains strong. Tony Dwyer of FTN Midwest Securities thinks tech earnings will actually surprise to the upside.

ANTHONY DWYER, EQUITY STRATEGIST, FTN MIDWEST SECURITIES: The overall economic environment, which has been driven by interest rates, has created a fear among investors that technology companies are going to report disappointing earnings. We're finding that technology companies are doing just fine and that was reinforced by IBM's positive pre-announcement earlier today.

MILLER: He says now is a good time to load up on tech stocks, even those which rely on discretionary consumer spending.

DWYER: Common sense would tell you, you don't want to buy a tech company that is directly exposed to the consumer. The problem with that thinking, though, is that those stocks are already down so much it may not necessarily be true. This may be the time to start buying some of those consumer-related tech companies.

MILLER: Much of the outlook for tech depends on the outlook for the economy. Assuming there isn't recession, some analysts say tech could outperform the broader market again this year. Erika Miller, NIGHTLY BUSINESS REPORT, New York.