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IBM's Warning: The Day After

By Maxine Shapiro, KERA 90.1 commentator

Dallas, TX – As previously warned, earning season can be volatile and downright fickle for any particular industry. Attitudes change as swiftly as the North Texas skies - one forgets what they were even a day ago. But the fundamentals remain the same. I'm Maxine Shapiro with KERA Marketplace Middays.

Yes, it was just over 24 hours ago when IBM warned that they would not meet the expectations of analysts. The significance of this negative outlook reverberated through the technology sector like some cartoon character being hit on the head with a heavy mallet.

As the Wall Street Journal indicated, it's been over a decade since IBM has had a warning. Here's a company whose reputation has been synonymous with stability and growth. Some believe that in light of the some recent accounting scandals, the big companies are going to take a "more conservative, less aggressive approach to their reporting." Sounds to me like they're being more honest.

The Wall Street Journal went on to say that this warning also might be a "signal that business investment in new technology remains weak." Which brings us to today. The Compaq Computer Corporation said it would not only meet analyst expectations, but Compaq expects to exceed its first-quarter profit forecast. You guessed it - the technology stocks rallied on this news - but not for long. Even as we speak, the technology-heavy NASDAQ market is finding it difficult to stay higher on the day. Though traded on the New York Stock Exchange, Nortel warned that their first quarter loss should be wider than expected. And Verizon warned it would not meet expectations.

Now mind you, all of these news items are pre-announcements. They haven't even come out with their actual earnings yet. Hence the term "warnings." Which brings me to a warning of my own: I will continue to occasionally bore or excite you during this earning season. I highly suggest you do not make your investment decision based on any initial warning or earning. As witnessed by the last two days, waiting for the dust to settle is usually a better strategy. For KERA Marketplace Middays, I'm Maxine Shapiro.

Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 P.M.