Tech companies have spent the last two months inundating investors with dire warnings about how bloated inventories, slowing demand and an overall economic downturn will deal a blow to their quarterly earnings.
Over the next two to three weeks, shareholders will find out if most of those pessimistic pronouncements turn out to be true.
This week marks the start of the earnings reporting period for the first quarter of the year. Over the next three days, a handful of closely watched Internet and technology firms -- including Yahoo, Motorola, DoubleClick and Juniper Networks -- will offer up quarterly numbers.
If positive, the results ought to provide some much-needed reassurance for a shell-shocked investing public that's seen much of its stock market wealth evaporate in the technology bear market of the past several months. However, the mood on Wall Street is such that no one has very high hopes.
"There's no irrational exuberance," said John Scherr, co-founder of WhisperNumber.com, which surveys investors about earnings expectations. "People aren't expecting huge things from the companies in their portfolios."
Of the four aforementioned companies, all have seen their stocks drop precipitously over the last six months. All, with the exception of Juniper (JNPR), have also issued earnings warnings or large-scale layoffs in the last 1.5 months.
In Yahoo's case, Wall Street analysts surveyed by Zacks Investment Research are expecting the company to report no profit this quarter (though at least they're not projecting a loss). A month ago, the company (YHOO) warned that a slowdown in online ad spending would deal a blow to its bottom line. The company reports its numbers Wednesday.
For Motorola, the analyst consensus estimate is a loss of 7 cents a share. The company, which reports earnings Tuesday, announced in March that it would eliminate 7,000 positions from its mobile phone division. Earlier, it warned investors that first quarter earnings would be lower than first anticipated.
For DoubleClick (DCLK), which disclosed plans in March to cut 10 percent of its workforce, expectations are a loss of 9 cents a share.
Only Juniper's earnings outlook remains on the positive side. Analysts are predicting the networking equipment maker to report earnings of 25 cents a share.
This quarter, Scherr said, the analyst estimates aren't differing sharply from the whisper numbers, which are earnings predictions compiled through surveys of individuals. More often than not, individual investors are expecting earnings to be a bit higher than Wall Street analysts predict.
"This is extremely surprising," Scherr said. "Based on all the negative reports and the negative earnings pre-announcements, I would not think there would be as much optimism."
Still, the earnings reports on tap for this week are few in comparison to what's ahead. Next week, earnings reports are scheduled from, among others, AOL Time Warner (AOL), Microsoft (MSFT) and Sun Microsystems (SUNW).
In a Monday research note, Richard Bernstein, chief quantitative strategist at Merrill Lynch, cautioned investors that the economic slowdown that has depressed stock prices of many formerly high-flying tech firms isn't expected to dissipate after a couple of disappointing quarters.
Historically, the average length of an earnings slowdown is 8.5 quarters. The current slump has barely stretched for 3 quarters.
"My sense is that the full impact of the earnings slowdown has yet to be felt throughout the market," Bernstein wrote.
