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A large number of tech giants have been ratcheting back guidance for the current quarter, but there are still some big names that may need to issue warnings in order to temper expectations for the next round of quarterly reporting.

As tough macroeconomic conditions have persisted -- and for many industries, worsened -- since technology companies last offered their projections in October, analysts have been trimming estimates for many tech companies, citing slower consumer and IT spending. Many now expect some companies to warn for the current quarter in early December or risk disappointing Wall Street when they next report in January.




Cisco Systems











have all come out in the last few days with warnings that the fourth quarter will be even worse than previous forecasts.

What's unclear is where that leaves other tech companies like






, many of which reported in the middle of October but haven't updated investors since.

A fraction of analysts have already started to cut their estimates, arguing that there will likely be no sustainable rally in tech stocks until these companies warn about the current quarter and offer conservative forecasts for 2009. Jeffrey Lindsay, analyst with Sanford Bernstein, says that it's hard to gauge what companies will actually say as their visibility isn't much clearer.

"We're at an unprecedented point right now where no one really knows anything," Lindsay says. "Nobody knows how the consumer is going to react. Nobody knows what's going to happen to the dollar. Unfortunately, with this level of uncertainty, companies will offer wide guidance again or they'll take the top end of guidance down a lot."


The idea that IBM would need to scale back its forecast might be far-fetched when one considers how often the company has surprised to the upside. When it last offered guidance on Oct. 17, IBM was confident it could deliver full-year earnings of "at least" $8.75 a share. That figure implies fourth-quarter earnings of $3.07 a share.

However, analysts are expecting a fourth-quarter profit of $3.05 a share, according to Thomson Reuters, which is below IBM's forecast. For the full year, earnings are expected to reach $8.72 a share, also beneath the company's own target. Since IBM offered its guidance, shares have fallen more than 18% to around $75, a decline of 32% in 2008.

Davenport analyst F. Drake Johnstone recently cut his fourth-quarter estimate for IBM to $3 a share and his full-year earnings target to $8.68 a share, below the average analyst consensus. Johnstone argues that global information-technology spending should remain flat or decline in 2009, citing reports of "significant deterioration in corporate demand" by Cisco and comments by Intel's CEO that the economic downturn is worse than he had experienced.

"Given the significant turmoil in the financial services sector, tight credit markets, potential recessions in the U.S., western Europe and Japan, and reduced IT spending by small to medium businesses over the past few weeks, we believe that there is potential risk that 2009 global IT spending could remain flat or decline year-over-year," Johnstone wrote in a research note.


irked investors on Oct. 22 when it forecast that fourth-quarter revenue would fall in a range of $6 billion to $7 billion. The $1 billion spread in Amazon's outlook was much greater than analysts had expected. While the Thomson Reuters average estimate was initially above Amazon's target range, it has now fallen closer to the midpoint at $6.57 billion. The stock has been punished since the outlook was first offered, falling nearly 25% to $38.

Even after taking Amazon's cautious view into consideration, Barclays Capital analyst Douglas Anmuth said that recent cautious and negative comments on quarter-to-date trends from

Best Buy





, Nokia and Intel suggest that Amazon "could see weakness across key categories."

Anmuth said he expects Amazon to see $6.2 billion in fourth-quarter revenue, which is at the low end of the company's guidance range and below the average analyst consensus.

"Heavy markdowns by competitors in the fourth quarter, coupled with trading down to lower-ticket items, could also drive

average selling prices lower and pressure Amazon margins," Anmuth wrote in a research note. He also points out the continued deterioration in retail and in the broader macro environment, as well as greater foreign-currency headwinds due to a stronger U.S. dollar.


In its third-quarter earnings report on Oct. 30,



said its expects fourth-quarter earnings to fall in a range 2 cents to 4 cents a share, before items. For the full year, it now expects to book a profit of 5 cents a share to 7 cents a share, down slightly from its previous forecast.

Currently, the Thomson Reuters average estimate is for a profit of 4 cents a share in the fourth quarter, although that figure was higher a month ago before Motorola disappointed Wall Street with its own forecast. For the full year, analysts expect Motorola to notch a profit of 6 cents a share. Shares of the handset maker have tumbled nearly 38% since the earnings announcement to under $4 a share.

The scenario is worse for Motorola now that Nokia, the global leader in handsets, cut its 2008 volume shipment expectations and warned that industry mobile device-shipment volumes will be down in 2009 compared to 2008. If handset volumes were to decline next year, it would be the first contraction since 2001, which has been the only down year in the history of handsets.

"Motorola's earnings-per-share guidance range for the fourth quarter is 2 to 4 cents, which is a very ambitious goal now that we know what is happening with the U.S. consumer spending in November," says Tero Kuittinen, senior director of research with Global Crown Capital. "Of course, Motorola's U.S. exposure has been growing rapidly over the past six quarters as the company has nearly pulled out of Europe."


When eBay reported its third-quarter results on Oct. 15, it said revenue in the fourth quarter should come in between $2.02 billion and $2.17 billion and earnings should be in a range of 39 cents to 41 cents a share. A month ago, that forecast sorely disappointed analysts who have now pulled back their estimates. Wall Street is now predicting revenue of $2.13 billion and earnings of 40 cents a share for eBay, according to Thomson Reuters.

Clayton Moran, analyst with Stanford Group, recently pulled his fourth-quarter revenue estimate further below the consensus estimate to $2.08 billion, near the midpoint of eBay's guidance range. Perhaps more importantly, Moran reduced his 2009 revenue growth estimates to 1% from 5%.

"We expect domestic online commerce to drop in the fourth quarter based on the rapid deterioration in the economy, and supported by our channel checks," writes Moran in a research note. "Active listings have increased but listings growth is not as good an indicator as in the past due to reduced listings fees and extended listings periods. In addition, couponing reduces the correlation between listings and revenues."





last reported quarterly results on Oct. 23, it projected that fiscal second-quarter revenue would range from $17.3 billion to $17.8 billion and earnings should total 51 cents to 53 cents a share. Analysts expect earnings of 51 cents a share on revenue of $17.3 billion, according to Thomson Reuters.

Microsoft also lowered its full-year expectations to a range of $64.9 billion to $66.4 billion in revenue and earnings of $2 to $2.10 a share. The company had previously projected revenue ranging from $67.3 billion to $68.1 billion and EPS of $2.12 to $2.18. Analysts are expecting full-year revenue of $64.8 billion and EPS of $2.01.

D.A. Davidson analyst L. Alan Davis reduced his outlook for Microsoft given "increasing evidence of deteriorating PC market and IT spending environment." Davis now expects Microsoft to notch a full-year profit of $1.99 a share, 2 cents shy of the average analyst consensus and well below Microsoft's guidance range.




disappointed Wall Street on Oct. 21 when it said that it expects fourth-quarter revenue of $1.77 billion to $1.97 billion, including traffic acquisition costs, or TAC. But for the full year, Yahoo! reduced its revenue guidance to a range of $7.18 to $7.38 billion, including TAC. That was down from its previous forecast of $7.35 billion to $7.85 billion.

Mark May, analyst with Needham, said he is reducing his estimates for 2009, which are already below consensus estimates. Currently, analysts expect Yahoo! to notch a profit of 47 cents a share in 2009, while May is expecting the search giant to notch a profit of 35 cents a share.

"While the valuation may be nearer trough levels, we don't see the stock working until negative earnings revisions turn positive, which we don't see for awhile," May wrote in a research note. "The considerable headwinds the company faces in the foreseeable future include the need to continue growing search monetization, pricing pressure in premium display inventory, and weakness in the affiliates business."

A Recovery in 2009?

While it may sound as though analysts are beating up on tech companies, many are optimistic that a lot of these names have a greater potential to recover in the second half of 2009 and beyond. While D.A. Davidson's Davis did cut his estimates for Microsoft, he says that the company's balance sheet and cash-flow generation "are unmatched" and that it should gain IT budget share in 2009.

Similarly, Barclays' Anmuth says that Amazon "remains a strong franchise in our view" and the company's commitment to providing broad product selection and low prices "could actually help accelerate market share gains as many traditional retailers face liquidity issues and have structurally higher fixed costs."

Additionally, some analysts note that while it looks as though tech companies are underperforming, that case isn't true for some when comparisons to year-ago and sequential results are thrown out the window and the current quarter's performance is matched against rivals in the same industry.

"The problem is whether you judge these companies on their performance relative to themselves," says Sanford Bernstein's Lindsay. "You'd be disappointed if you were basing your expectations on how they did last quarter or a year ago. If you look at the market as a whole and how they are performing relative to direct competitors, their performance is extremely good. It's a bit of a mixed signal. "