Anyone that follows the computer and microelectronics sector knows that business is unusually volatile and patchy at the moment, so it will come as no surprise that there has been a string of conflicting indicators of the state of play coming out over the past couple of days. Biggest shocker came from Stratus Computer Inc, which saw 22.3% of their value wiped off its share price – they fell $7.50 to $26 even – after it revealed that third quarter profits would be only about flat with the 37 cents a share it reported a year ago. It is currently going for between 35 and 38 cents, on sales up 19% at $82m – which also represents a slowdown from the rate at which it has been growing: it had projected $88m sales for the quarter. The company blames weakness in the US market and in its indirect channels – which mainly means its two big OEM customers, IBM and Olivetti. We do not see enough business developing during these last two weeks of the quarter to allow us to achieve our original revenue target, said chief executive William Foster. We are going to manage the company at the 20% to 25% growth level for the near-term, unless we see signs of improvement in these market channels, he said. Compaq Computer Corp also projects a cloudy outlook, saying that personal computer sales in August were mixed judging from comments from its dealers. But Novwll Inc, which went thorugh a bad patch in its third quarter to July said that the slowdown in its software sales does not look like continuing, and that any weakness is down to customers evaluating its latest products before deciding which way to jump. Software sales now represent about 75% of the company’s business, up from 50% in 1988. And IBM is saying that the strength in its US business that characterised its second quarter continued into August, and that US business will grow for the full year, the first time it has done so since 1985. But despite the loud whistling in the dark coming from the Semiconductor Industry Association, there there is very little cheer coming from the chipmakers, and Kidder Peabody & Co analyst Richard Whittington banged the sector on Monday by lowering his earnings estimates on 15 semiconductor companies, including Motorola Inc, Chips & Technologies Inc and Intel Corp. For Motorola’s year to December he cut his estimate to $4.00 a share from a previous $4.15 a share and for 1990, he cut his estimate to $3.50 a share from $4.00. Last year, Motorola earned $3.43 a share. Intel and Chips & Tech came in for similar treatment, and he tipped the latter to be hardest hit among the semiconductor companies. His particular worry is for companies dependent on the personal computer and memory chip market, saying that demand for US machines from overseas is down, as are orders from Taiwan. Electronic executives cite an excess of PC and semiconductor inventories in the US and Taiwan, he says, adding that Japanese PC and workstation purchases have slowed. Moreover the hot ticket is now notebook-size computers and laptops, which use mainly cheap, low-end microprocessors and not much memory compared with desktop 80386 boxes. And the signs of pain in the memory chip market are underlined by the full-year figures from Micron Technology Corp, alongside, showing a very sharp turnround indeed in the fourth quarter. (The fall in year-end earnings per share is because of the new shares issued to Amstrad Plc last autumn).
