STOCKWATCH - War is good for tech stocks as Hitachi re-focuses
STOCKWATCH - War is good for tech stocks as Hitachi re-focuses
Dominating the headlines is, will there be a war with Iraq? Whilst political rhetoric claims that the US and its allies want to "free" Iraq from the tyranny of its leader, other claim it's an effort to ensure Iraq coughs up cheap oil. But could there another reason? Since coming to power George W Bush has been accused of failing to re-ignite the US economy, some financial pundits in the US are now beginning to address the history books and have noticed that wars are good for the US economy and in particular the stock exchange. Reports from Wall Street have pointed out that US shareholders have benefited from every US war in the last 90 year. In recent campaigns tech stocks have been the prime winner. Could George W see a war with Iraq as the solve-all solution to economic, political and foreign issues?
Ned Riley, a chief investment strategist with State Street Global Advisors of the US said; "Tech stocks in particular, is one that would benefit from a war rally."
War or not, analysts are predicting that there will not be a huge round of announcements from the technology sector, which without the war will keep tech stocks investment at the low state it is currently in. If the United Nations does decide to give its weapons inspectors the extra time they have requested and the US complies with the United Nations (UN), it is likely the fear of war will continue to affect the markets, which could also continue to affect perceptions of President Bush's economic abilities.
Those predicting a rise in tech stocks due to a war have predicted that Cisco, Oracle and Siebel to be the winners. With the storage market still reaping the business benefits of the attacks on US on September 2001, it is also likely that a few of the storage vendors will benefit. This week has also seen Veritas and Quantum report healthy financial results.
Shares in Japanese giant Hitachi jumped on the Tokyo stock exchange when Hitachi announced it was considering pulling out of or selling non core businesses and instead will concentrate on successful units such as its storage division.
Shares jumped by six Yen following the announcement. Third quarter results from Hitachi will be made available on February 4, 2003.
Although re-focusing on its storage and IT division, Hitachi has been hit by the global IT slump, it said. Profit forecasts have been cut to 36 billion Yen from the previous 60 billion following its record loss of 483.8 billion in 2001.
At the announcement, Hitachi said the mid-term business plan was to consider withdrawing or selling "several" non-core businesses, but there are no concrete decisions as to what businesses will be sold yet. Hitachi said it will focus on profitable areas such as its hard disc manufacturing division.
To reaffirm this, Hitachi announced it will be spending 60 billion Yen a year on capital investment on its hard disc business to achieve an operating profit by March 2005. It predicts this investment will drive sales to 780 billion Yen by March 2006, which is a six fold increase on current levels.
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