Tech execs cautious, Asia to lead recovery

By Kelvin Soh and Georgina Prodhan

TAIPEI/PARIS (Reuters) - Shares of technology companies are surging on hopes of a recovery, but their executives remain only cautiously optimistic until they see signs of a pick-up in consumer demand that will likely be led by Asia when it comes.

Most company executives speaking to the Reuters Global Technology Summit this week gave a dour assessment of the economic climate, and few felt a recovery was likely in the near-term despite some inventory restocking that has lifted production of chips and other components.

Executives at the New York and Paris legs of the summit were gloomier than counterparts in Tokyo, many of whom reported higher orders as an apparent result of China's stimulus package as well as incomes that continue to rise in many parts of Asia.

"It depends on whether you're talking about the real world or the world in people's minds," said Martin Sorrell, chief executive of the world's largest advertising group, WPP (WPP.L), speaking by videolink from London.

"I think psychologically the mood has got better, but that's not the real world."

MSCI's global information technology index .MIWD0IT00PUS has surged more than 37 percent since its low in March this year as investors bet that the sector will soon emerge from a bottom.

But that surge seems somewhat detached from reality.

U.S. consumers, whose spending accounts for about 23 percent of the world's GDP according to Thomson Reuters data, have been pulling back on their purchases, pushing retail sales in the world's largest economy down for a second straight month in April.

And although a number of company executives pointed to some signs of stabilization in U.S. consumer demand, many said the current uptick in orders could be partly attributed to an inventory correction rather than any real growth in end demand.

"There is an inventory bounce going on now, but I don't think it will be sustained going into the back half," said Warren East, CEO of chip designer ARM (ARM.L), whose technology is used in more than 90 percent of the world's mobile phones.

"There's no underlying catalyst to make consumers go out and buy electronic products."

CORPORATE WOES

Companies heavily dependent on corporate spending sounded far more cautious and suggested that improved sentiment could be based on nothing more than hype.

"I wish I could say we're all done and any of the economic issues are completely behind us, but I don't think any of us would honestly say that's a reality now," Verizon (VZ.N) Chief Financial Officer John Killian told the summit.

IBM's (IBM.N) Chief Financial Officer Mark Loughridge said: "It's too early to say that we're seeing signs of recovery."