It's hard to find good corporate news in the US these bleak economic times, so when Dell Computer, the world's biggest computer maker, announced unexpectedly that it was reaffirming its fiscal third-quarter earnings guidance yesterday, it was enough to give the markets, particularly the tech-heavy Nasdaq, a strong nudge upwards.
But the after-shocks of the terror attacks of September 11th keep reverberating through Wall Street and the latest came in the form of a huge rise in people seeking unemployment benefit, nearly triple that forecast by economists.
Lay-offs in the airline and travel business helped send initial jobless claims to a nine-year high, with the number claiming benefits for the first time soaring from 71,000 last week to 528,000, the biggest weekly jump in a decade.
Dell yesterday confirmed that it would meet its target set seven weeks ago of earnings of 15 cents to 16 cents a share on revenue of $7.2 billion (€7.9 billion) to $7.6 billion. Analysts had expected it to lower its forecast. This is encouraging news for the 4,500 plus workers at Dell plants in Limerick, Bray and Dublin, especially as the Austin, Texas-based company had been expected to suffer more from the after effects of the September 11th attacks.
Demand had rebounded faster than expected after the attacks, Dell said. Its steady performance can be partly attributed to a blanket advertising campaign on US television and aggressive price cutting.
Dell's main competitor, Compaq Computer, fared less well. It forecast earlier this week that its revenue for the third quarter would fall by some $1 billion below its previous forecast of $8 billion to $8.4 billion.
"We're winning new customers at a rapid rate and successfully managing our operating expenses," Dell chairman and chief executive Mr Michael Dell said. "Those strengths in the midst of a trying period give us great confidence for the long term."
However, Dell declined to give a forecast for the fourth quarter and analysts believe PC sales will be depressed until late 2002.
The news from Dell, coming on top of an upbeat comment on Wednesday from Cisco chief executive Mr John Chambers and US President George W. Bush's promise of a multibillion stimulus package, gave some hope to the struggling tech sector. To combat hardship and lower spending, President Bush said yesterday he was extending unemployment benefit for 13 weeks in the states worst affected by the events of September 11th.
The Nasdaq has now rebounded to its pre-attack level. For most of yesterday it traded higher than its closing level of 1,590 on September 10th. The Dow is still some 500 points adrift. On Wednesday the Nasdaq surged 5.9 per cent, its biggest gain since April.
Investor Mr Warren Buffett, chairman of Berkshire Hathaway, is convinced the US is in a steep recession, according to a memo he wrote on September 26th published in the Wall Street Journal.
European stocks stage solid rally: page 2
