Tech stocks cheapest in seven years as profit estimates drop

China Slowdown

“Capital expenditures in corporate America, corporate China, corporate Europe, are what drive the technology sector profits, and that has just remained flat,” Chris Hyzy, who helps oversee about $325 billion as chief investment officer of U.S. Trust in New York, said in an April 25 phone interview. “Because Europe is in very bleak economic times and China’s facing a slowdown, the tech sector is unfavorably harmed more than most sectors, if not the most.”

Juniper, the second biggest computer-networking equipment, forecast profit and sales below the average analyst estimate after reporting last week weaker sales to telecommunications providers and big companies. Chief Executive Officer Kevin Johnson said after last week’s report that demand from government agencies and financial-services firms had also weakened. The shares fell 20% in 2013, sending the valuation to 13.4, the lowest since July.

China Weakness

Cisco said in February that weakness in China and Europe and lackluster government spending on networking equipment had slowed sales. The San Jose, California-based company, which cut 500 jobs last month, will post the smallest profit increase in six quarters when it reports May 15, according to analyst estimates compiled by Bloomberg. The shares, down 2.2% since then, trade at 10.2 times projected earnings.

“It has been nothing short of terrible in this space,” said Walter Todd, who oversees about $940 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina. “We really need to see these downward revisions abate in the sector before you get sustainable outperformance.”

Bloomberg News

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