By William Fellows
This quarter’s earnings should reflect a recovery in the enterprise software market according to Merrill Lynch & Co, mainly because of the easing of Y2K spending issues. The momentum from Oracle and Great Plains’ last quarters should carry forward, although the pure play ERP houses are still going to come up short, it believes. The rest should experience growth on the back of growing demand for CRM, front office and other procurement software. BMC, Microsoft and MicroStrategy could come in ahead of expectations; Computer Associates and PeopleSoft are the most likely to fall below the line, the brokerage thinks.
Internet stocks will see earnings upside on average, although the gap between winners and losers is going to widen considerably, Merrill Lynch believes. The market leaders, including AOL, Amazon, Lycos, Barnes and Noble and Inktomi will be taking market share. Seasonal issues that will have an effect include traffic, time online and commerce and advertising spending. AOL should add 775,000 users compared with 1.8 million in the last quarter, while Yahoo is expected to report a 10% to 15% growth in page views. The average spend at Amazon will show a decline to $30 from $35. Advertising spending is expected to be up 11% sequentially on average.
Server vendors should benefit from being perceived as the suppliers of internet infrastructure. Most will beat expectations, with IBM, EMC and Sun leading the way, the brokerage believes. The UK market appears to be picking up, according to its research, while Hewlett-Packard is experiencing growth in Asia.
