October 09, 2009, 12:11 PM — U.S. markets are set to absorb a wave of earnings reports, with tech stocks lifting on positive macro-economic news and rising confidence among industry insiders such as Google CEO Eric Schmidt.
Schmidt, in New York this week for a Google global sales meeting, added his voice to recent bullish comments from a variety of industry leaders. "The worst is behind us and we clearly see aspects of recovery, and what is notable is we're seeing aspects of recovery not just in the United States but also in Europe," Schmidt told a group of journalists at a roundtable discussion on the sidelines of the company's sales meeting.
"I had been in error in assuming there would be a lag -- that it would be U.S. first and Europe second. Asia of course was never hit in the first place," Schmidt said.
Though Google cofounder Sergey Brin, also at the meeting, expressed doubts that Google would ever double in size from its current head count, the executives appeared sure the company would continue to grow to take advantage of the rebounding economy.
"We are increasing our hiring rate and our investment rate in anticipation of a recovery," Schmidt said. The value of acquisitions, however, would probably be on the order of millions of dollars, not billions, he said.
IT companies have kept up a fairly torrid pace in mergers and acquisitions despite the uncertain economic outlook. Compuware announced the latest $100 million-plus acquisition in the tech arena Wednesday, when it said it would acquire Web application management vendor Gomez for US$295 million. Compuware said it will incorporate Gomez technology into its own application performance management family of software.
Though tech vendors have managed to hit better-than-expected earnings numbers this year due to cost cuts, the real question is whether revenue will rise over the next few quarters.
The release of Windows 7, due in two weeks, will help increase upgrades and sales, according to IDC. In a study released this week, IDC said that Windows 7 will help create 25,000 jobs in the U.S., and that $41 billion will be spent by the end of next year by companies developing, marketing, supporting and offering services around the new operating system.
Nevertheless, clouds still hang on the horizon. IDC this week also said IT managers can expect their budgets to grow, but to a lower level than was reached before the recession. The highest realistic prediction is for a 2 percent rise in spending by 2013, said IDC research director Chris Ingle at a Windows 7 event in London Tuesday.
IT leaders including Google, AMD and Intel will kick off the earnings season next week, as investors hope to get more clarity on the next few quarters. Though the second quarter brought all the major stock market indexes into positive territory for the year, share prices have wavered recently in a variety of sectors, including tech. Investors are wondering whether earnings reports will bring enough good news to sustain a continued market rally.
The U.S. Labor Department reported good news on Thursday, noting that the number of U.S. workers filing new jobless claims slid to a nine-month low last week. The Nasdaq, which lists many tech companies, rose 23 points to close at 2133, up 34 percent for the year. Nasdaq computer-industry vendors (excluding telecommunications) are, in aggregate, up 52 percent for the year.
