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For Techs, Are Happy Days Here Again?

By Cynthia L. Webb
washingtonpost.com Staff Writer
Wednesday, January 19, 2005; 9:49 AM

Yahoo, IBM and Motorola were all over the news this morning, as strong quarterly results from each of the technology bellwethers had the experts predicting that 2005 may be the year that the overall tech sector finally shakes off the lingering effects of the great 2000-2001 bust.

Summing up the trifecta of positive earnings, USA Today said the companies "declared the global economy healthy." And it seems all the big research firms were already on record with bold predictions for a banner year.

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Last week, The Street.com reported the results of two surveys that indicated a rise in tech spending. "Citing a study by trade publication CRN, Merrill Lynch analyst Steve Milunovich said 69% of large firms surveyed expected to increase their technology budgets over the next 12 months, an increase of 16 percentage points over a September survey. And only 11% of the firms surveyed said they expect to cut spending. Networking hardware and software spending expectations reached multiyear highs, breaking out of the relatively low range of expectations seen over the past two years, but the survey also found spending in other technology markets and categories will likely be up across the board, Milunovich said," the article said. "Separately, a survey by Piper Jaffray found that plans for IT spending are at their highest levels in eight quarters. And it, too, found a very low percentage of companies expecting to cut IT spending in the next six months -- just 12%."
TheStreet.com: Surveys Bullish On Tech Spending Growth

Meanwhile, Reuters picked up on a survey of chief financial officers: "Many U.S. companies plan to raise capital and technology spending in 2005 as they seek to comply with new federal accounting laws passed after the slew of bookkeeping scandals over the last few years. Consumers may feel the effect of the technology spending, as more than three-quarters of those companies plan to pass along at least half or all those increases, according to a survey of U.S. chief financial officers," the wire service reported. "According to the quarterly survey, which polled 185 CFOs of public and private companies, U.S. companies, on average, plan to increase technology budgets by 12% over the next 12 months. The figure was 7% when the 12-month outlook was last published three months ago."
Reuters via The Los Angeles Times: Tech Spending At Firms Seen Rising (Registration required)

Yahoo! Literally

Yahoo's latest financial results got a lot of ink today, with stellar online advertising results driving the company's numbers. "Wall Street analysts were upbeat about Yahoo's earnings, which they viewed as strong and free of surprises. Online advertising remains on a growth path, and there are no indications of a slowdown, analysts said," CNET's News.com reported. "I think it confirms that everything is very strong," according to Piper Jaffray analyst Safa Rashtchy.
CNET's News.com: Yahoo Beats The Street

But if there's one item in today's Filter that will surely get repeated over and over within the advertising industry, it's Yahoo chief Terry Semel's observation that 2004 was "'the year in which we witnessed the beginning of a tipping point in advertising,' with more mainstream advertisers increasing their marketing online." The Wall Street Journal picked that up.
The Wall Street Journal: Yahoo's Profit Surges Amid Ad Boom (Subscription required)

So what facts are driving that bold statement by Semel? "The surge in Yahoo profit, officials said, was largely attributable to dramatic increases in ad dollars spent by businesses selling products and promoting their images on the Internet, a sign of the increasingly mainstream nature of Internet advertising, both in the United States and abroad," The Washington Post reported. "The top 200 U.S. advertisers on Yahoo spent 39 percent more on ads in the fourth quarter of 2004 than they did in the same period a year earlier, officials said. A significant part of that increase came from ads delivered to computer users searching for information online through Yahoo, which will be 10 years old in March. It also reflected Yahoo's growing user base, as well as the increasing amount of time that existing users of Yahoo's e-mail and other services are spending online."
The Washington Post: Yahoo Profit Rises Dramatically (Registration required)

"The Internet is clearly catching up to its potential," Yahoo's chief executive Terry Semel said, as quoted by USA Today. "The advertising market's rebound really helps us." More from the paper: "Semel said Yahoo's top 100 advertisers spent more money with the company in the fourth quarter of 2004 than in all of 2002. In February, Yahoo cut ties with rival Google and introduced its own search engine -- one of the highlights of a "remarkable" year, Semel said. That move, plus alliances with broadband carriers such as SBC and Rogers Cable, helped expand Yahoo's business," the paper said, also noting its new alliance with Verizon.

An interesting footnote to the Yahoo news was picked up by The New York Times: "The company drew 119 million unique visitors in December, more than any other site, according to comScore Networks, an Internet research firm." So Yahoo is outpacing rival Google in one key metric. While not addressing Google directly, company chief operating officer Dan Rosenweig gave some telling remarks to The Times: "We are a healthily paranoid company," he said. "We are appropriately focused on the fact that this is a fluid market, but we're a company born out of competition."
The New York Times: Yahoo's Profit Soars In Quarter On Ad Spending and Investments (Registration required)

Hardly Blue

In its quarterly filing, IBM "said sales were up in each of its key businesses -- hardware, software and consulting services -- and in all markets worldwide," USA Today reported.


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