When it comes to Q2 earnings, Wall Street analysts are more positive about the tech sector than any other, reports WSJ.
Of course “positive” is a relative term.
Earnings for the technology industry are estimated to be down 24% this quarter, and yes, that’s improvement from last quarter’s minus 26%.
Meanwhile, analysts expect the Standard & Poor 500 as a whole to drop as much as 36%.
Why is tech expected to fare the least worst?
- Businesses are technology dependent: Technology is a key aspect of all business areas – for e.g. semiconductors for manufacturing, software for sales and distribution. As companies prepare for the recovery and increased business (and the government , their demand for technology will go up.
- Technology is cheaper than people: WSJ says:” In a weak economy, the last thing businesses want to do is hire people,” says Sung Won Sohn, economist at California State University-Channel Islands. “Instead, they choose to raise productivity by employing tech.”
- Demand from developing countried: The tech earnings forecast is also based on the assumption that fast-growing countries like India and China will have a increased demand for U.S. made high-tech software, processing chips and networking equipment. The theory is that these products have shorter life spans and hence need more frequent replacements.
- We’d like to add another – it’s easier for companies to spruce up their IT infrastructure without incurring huge costs – through upgrades and customised software improvements.
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