Though tech shares, just like company stocks in other sectors, have since April been battered by economic concerns, a strong rise in all major U.S. exchanges and indexes earlier this week shows that IT is playing an important part in helping investors stay hopeful for the rest of the year.
Economic recovery and sales of mobile computing devices fueled PC shipments in the first quarter, IDC said in a market report Tuesday. Shipments rose by 27.1 percent in the first quarter compared to the year-earlier period, IDC said. The quarter kicked off a year in which total PC shipments will increase by 19.8 percent, hitting 354.8 million units, IDC said.
Better yet for the vendors involved, IDC expects PC market revenue this year to surpass that of the previous revenue peak set in 2008 as more users set their sights on machines that give manufacturers higher margins.
User buying patterns will shift as new devices come on the market, IDC said.
"New devices such as e-readers and media tablets will pose disruptive challenges to conventional usage models while opening up intriguing possibilities in consumer and mobile business spaces," said Jay Chou, research analyst with IDC, in the report. "Aside from brute computing power, the value proposition of the PC will be increasingly measured by the flexibility with which it can meet the demands of content creation and content consumption as well as achieving optimal portability."
The report was widely credited with helping to lift stocks in all sectors. The tech-heavy Nasdaq closed the day at 2305, up by 2.76 percent; the broader Dow closed at 10,404, up by 2.1 percent; and Standard & Poors' 500-stock index bettered its 200-day moving average, a technical indicator that market analysts use to gauge overall investor sentiment.
The Dow and the Nasdaq continued their upward climb Wednesday, but hit turbulence on Thursday as the U.S. Department of Labor said that the number of new unemployment claims increased last week, and the Philadelphia Federal Reserve issued an index of regional manufacturing that showed a decline.
After climbing fairly steadily during the first quarter this year, shares of technology companies as well as companies in other sectors have been hit by concerns that the recovery from the Great Recession may be sputtering.
Still, the rally earlier this week pushed major indexes to their best levels since April. On Wednesday, the Dow hit 10409, down just 0.18 percent for the year, while the Nasdaq closed at 2305, up 1.62 percent for the year.
There is no doubt that computer stocks have been top performers since the recovery began last year. As of Wednesday Nasdaq computer stocks were up by 34.5 percent for the past 12 months. In comparison, for the past 12 months, Nasdaq telecom stocks were up by 7.46 percent, the Dow Composite was up by 22.5 percent and the New York Stock Exchange Composite Index was up by 18.95 percent.
Even though tech continues to lead other sectors, price pressure and intense competition in certain segments of the IT market are taking a toll on some vendors.
For example, Nokia on Wednesday issued an earnings warning, saying that second-quarter results would be lower than previously forecast. Sales for its devices and services businesses will be at the low end or just under the prior forecast of €6.7 billion (US$8.2 billion) to €7.2 billion, Nokia said.
The lower expectations are due to "the competitive environment, particularly at the high-end of the market, and shifts in product mix toward somewhat lower gross margin products," Nokia said in the report. The weaker euro also is playing a part, the company said.
As June comes to an end and vendors start issuing quarterly reports, market watchers and IT users will get an opportunity to see how a broad swath of technology companies foresees the rest of the year turning out.
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