Technology and every other sector is doomed. Wait, no it isn’t. Just kidding; it is… kind-of.
CNBC is at it again.
Much like the overall stock market, “America’s Business Leader” is doing its best bi-polar impression that leaves people no closer to answers - and actually heading in the wrong direction instead.
On the one hand, the network is breathlessly creating confusion by generating even more fear about the economy and credit markets. But in the next breath, it’s busy highlighting positive data points for certain companies and constantly banging on about how the markets are oversold and we’re due for a rebound.
That sounds great if your job is to provide financial entertainment. But my job is to find ways for you to make money.
While we could get a rebound because the market is oversold, I’m becoming more convinced that we’re just as likely to have a crash before we see a meaningful rebound. By that, I mean a day where you wake up and find the Dow Industrials down 900-1,500 points in the morning session.
Heck, at its lowest point early this morning, the index was 697 points below Thursday’s close, so this scenario isn’t as far-fetched as you might think.
And there’s something that CNBC isn’t telling you…
Technology’s Fuzzy Math
Technology is unfortunately no different from every other sector out there. Between now and the time when the economic stimulus package kicks into high gear, corporate earnings are likely to be terrible.
Take IBM (NYSE: IBM) and SAP (NYSE: SAP), for example - two technology companies, where results were highlighted as being good considering the weak environment. Yet a deeper look at the numbers reveals a darker side.
SAP was the first and only large technology company to make a negative pre-announcement this quarter. On October 6, the firm announced that software and services revenue would be up 13% to 14% for the quarter on a year-over-year basis.
“Hmm… given the current environment, that’s not a bad number,” you may say.
However, buried in paragraph 3 of that same press release, the company announced that software revenue - SAP’s leading indicator - would only rise between 4% and 5%.
Unfortunately, management didn’t offer any guidance in the report so we don’t have much clarity on what the company sees for the fourth quarter.
