Mixed outlook for technology

Outlook for technology stocks looks mixed. Chip equipment makers look like they will be facing a prolonged downtrend.

Chip downtrend has just begun: Gartner
THE current dip in global chip equipment sales isn't just a cyclical blip but the beginning of a downward trend, although the downswing will be milder than in past years, according to researcher Gartner Inc.

In its latest study, Gartner says that after 64 per cent growth in 2004, worldwide chip capital equipment sales are projected to decline 11.6 per cent in 2005, and a further 6.5 per cent in 2006 before recovering in 2007 and 2008...

Among the three equipment segments, the wafer fab equipment market will see the strongest decline...12.2 per cent decline from 2004. The automated test equipment market is the only segment that will show positive spending this year, with an increase of 3.1 per cent...

Memory chip makers, though, may be able to look forward to a bounce in the second half of the year.

Battered memory chip makers look to better second half
Memory chip makers, battered in the first quarter as prices sunk by 40 percent, should fare better in the second half as seasonal demand lifts sales and manufacturing bottlenecks limit supply.

Industry players, led by Samsung Electronics, are switching capacity from lower-end DRAM to flash memory chips used in hot-selling digital cameras and music players. That, combined with the industry migration to next generation technology, should keep supplies tighter after a glut squeezed earnings at global chipmakers in the first quarter...

Microsoft is also expecting a better year ahead.

Microsoft Third-Quarter Profits Double
Microsoft has reported its financial results for the quarter, noting that in the period, profit has nearly doubled. Although sales were below Wall Street estimates, Microsoft expressed an upbeat outlook for the year ahead.

The company had a net profit of US$2.56 billion for its fiscal third quarter, compared to $1.32 billion a year earlier... With its current product pipeline and investment in development of new products and services, the company expects increased revenue growth in fiscal 2006, [Microsoft controller Scott] Di Valerio added...

See also my recent post on technology stocks.