Tech sector wary of H2 amid uptick
NEW YORK (Reuters) - Technology companies spot signs of a pickup in demand but remain wary or skeptical that their sector has hit bottom, with many still cautious that the uptick merely reflects restocking by customers rather than a fundamental recovery in demand.
Speaking at the Reuters Global Technology Summit in New York on Monday, chief executives from an array of IT firms from Advanced Micro Devices Inc to Sybase Inc offered dour assessments of the economic environment.
Technology companies were stung this year by a steep drop in sales as consumers and businesses alike dialed back spending. Worldwide PC shipments fell 7.1 percent in the first three months of 2009, according to research firm IDC.
Suppliers responded by drastically cutting back on production, leaving inventories lean. Few analysts are willing to say that demand is truly recovering, given mounting job losses and an uncertain economy.
"In a situation like this particularly, a bottom is something you can really call when you're past it and looking down at it," said Advanced Micro Devices CEO Dirk Meyer.
"I'm hopeful things will stabilize and we'll see a resumption of growth in the back half of the year," he added.
Sybase foresees technology sector spending remaining tepid for at least a year and possibly until 2011.
"Nobody should run their business expecting the party is starting again," said CEO John Chen.
But Nvidia Corp CEO Jen-Hsun Huang sounded a discordant note, asserting that indeed a bottom has been reached, echoing comments made by Intel Corp, the world's largest chipmaker, last month.
"Demand appears to be growing again -- obviously from a lower base, but we're seeing demand growing nicely," Huang said. "We're actually seeing that there are spot shortages in the channel for several of our products."
Nvidia's dedicated graphics chips are featured in desktop PCs and more high-end notebooks. The company is also making a push into low-cost netbooks with its Ion product.
Huang said industry inventory levels were near historical lows after cutbacks in production over past quarters.
Sanford C. Bernstein analyst Toni Sacconaghi said it is too soon to tell when a recovery will take hold. He said the United States appears to have stabilized, while Europe looks weak.
"There's a question whether Europe is going to get worse before it gets better.
Other executives were simply uncertain.
Marvell Technology Group Ltd CEO Sehat Sutardja said it was difficult to tell if technology demand was recovering, noting it was hard to distinguish between temporary moves to replenish inventory and a true rebound.
"Nobody really knows whether real demand is sustainable, if the improvement in demand in the last few months were really sustainable, or if this is just an overreaction of people trying to replenish the inventory."
Marvell supplies a wide array of semiconductor products, including chips for hard disk drives for its largest customer, Western Digital. Apple Inc's iPhone and Research in Motion Ltd's BlackBerry also feature Marvell chips.
Britain's ARM Holdings Plc said chip sales had improved in the second quarter but said the rise was due to customers rebuilding inventory.
ARM's technology is used in more than 90 percent of the world's mobile phones, and products as diverse as set-top boxes and media players.
And finally, some executives, while tight-lipped on their predictions for the broader sector or economy, were convinced that their smaller peers were less than aware of the potential pitfalls of an uncertain year ahead.
Symantec CEO Enrique Salem said his company is no rush to acquire, as he expects valuations of private companies to fall over the next year.
"Private company expectations on valuation are still too high. We can afford to be patient."
(For summit blog: blogs.reuters.com/summits/)