Tech firms face down market turmoil
18-03-2008
by ElectricNews.Net

Despite the market chaos sparked by the Bear Stearns sell-off, tech firms have seen off worse crises, analysts say.

Bear Stearns, America's fifth largest investment company, was acquired in a fire-sale by rival bank JP Morgan for just USD236 million. The bank was acquired on Monday for USD2 a share after its finances were hit by losses connected to mortgage-backed securities. The bank had reported a net fourth quarter loss of USD854 million.

The shock acquisition sent global stock markets into crisis and wiped billions off the Irish Stock Exchange, although the ISE and other European markets were rallying in early trading on Tuesday.

Goodbody Senior Equity Analyst Gerry Hennigan told ENN that the ongoing financial crisis might result in more casualties, but tech companies have weathered worse.

"When the dot-com bubble burst it was even worse for the IT companies," Hennigan noted. "Also, they all would have net cash in the balance sheet to weather the storm."

The Bear Stearns sale saw the technology-laden Nasdaq fall by 1.6 percent on Monday. Investment bank Lehman Brothers Holdings, whose share price fell 19 percent, may be about to report its smallest quarterly profit since 2003, reports have speculated.

Adobe Systems, which is reporting its quarterly results on Tuesday, saw its share price fall 4.8 percent to USD31.04 while on Monday Siemens posted a EUR900 million profit warning.

"Something like this doesn't make it look like we are going to see an end to it any time soon," Goodbody Senior Equity Analyst Anna Lalor said of the Bear Stearns sell-off. "On Wall Street they are talking about big job cuts on the back of this. Probably the outlook on that side of things isn't as good as it would have been twelve months ago."

Uncertainty about the state of the market was voiced by eBay.ie Managing Director, John McElligott. "There is a lot of uncertainty and I think we just have to wait and see how it all plays out," McElligott told ENN. "It is very hard to tell how long it is going to go on and how serious it is going to be."

Ebay's shares reached a 52-week-low of USD25.10 during trading on Monday before closing at USD25.77.

Recently Intel and Google's share prices have taken a beating, despite both posting record latest quarterly results, and Hennigan said the Bear Stearns sale could have a knock-on effect on big capital investment by such firms, although the weak dollar offered some solace.

"If global economies are weaker then the demand will be slightly lower. The only thing for US companies is, on the tech side of the picture… the dollar is so weak," Hennigan said. "They are reporting in dollars but getting revenue in non-dollar currencies. So there is a bit of give and take. If their revenue line is still growing, there probably won't be pressure on the R&D budget."

Irish firm Horizon Technology did not appear to be badly affected by the markets turmoil. On Monday its share price closed at EUR0.9, down just 0.332 percent. The firm recently confirmed it received an offer for the company priced at EUR1.18 per share.

Hennigan did not think that this offer will be affected by the sale of Bear Stearns. "Horizon's operations are based solely in the UK and Ireland. It is only seems to be a indicative offer. They wouldn't have any exposure in terms of investment banking."

By Bryan Collins