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The hollow ring of tech earnings reports: Eric Auchard


By Eric Auchard

Morgan Stanley Hi-Tech Index year-to-dateLONDON, July 17 (Reuters) – For technology investors looking for clues to how the sector is faring, Intel Corp sent a false positive signal with its upbeat quarterly report this week. Subsequent reports from IBM, Nokia and Google show how hollow any recovery for growth stocks is proving to be. Even though the growth sector has defied the broader market sell-off in recent weeks, all the signs point to weak trading in months ahead.

Nokia, the world’s largest mobile phone maker, offered a harrowing reminder of what life is like for companies exposed to the wider vicissitudes of consumer demand. It is struggling in a handset market set to decline around 10 percent this year, even though Nokia signalled the industry may be stabilising.   

Intent on keeping its dominant handset market share, the company said it was prepared to sacrifice profit margins in the second half of the year as it engaged in a price war with rivals. Meanwhile, its networks joint venture, Nokia Siemens, will lose market share instead of remaining flat as previously expected. Nokia_N97_launch

Adding to its woes is a shortage of components for its phones that will hurt its third quarter performance. Revenues are likely to fall a massive 25 percent for the full year. Any recovery in margins next year will depend on it showing improvement in the competitiveness of phone designs.