The Buzz

Earnings Report

Treo trails

ATI wasnt the only company going into the financial penalty box. Palm also warned Sept. 6 that its fiscal first-quarter sales of $354 million to $355 million wouldnt be up to snuff compared with the companys previous estimate of $380 million to $385 million. The culprit: Treo sales are flat. Why its such a big deal: The Treo accounts for 60 percent of Palms sales.

According to analysts, Palm is facing head winds because the smart-phone market is becoming cutthroat with prices. Meanwhile, carriers that bundle the Treo with wireless phone service increasingly have more clout. Toss in a bevy of new devices from the likes of Samsung and Motorola, and its a tough market.

How rough the waters will be for Palm remains to be seen. The company reports earnings on Sept. 21.

IT Spending

CIOs: 2007 looking up

More than 50 percent of CIOs plan on spending more on technology in 2007 than in 2006, according to a survey released by the Society for Information Management on Sept. 18.

To be specific, 51.8 percent of those surveyed said 2007 IT budgets would be higher than 2006 IT budgets, with 32.8 percent expecting flat budgets. The remainder, or about 15.4 percent, expect 2007 budgets to be lower than 2006 levels. In those 2007 budgets, respondents said 33.9 percent will be spent on internal staff, 14.6 percent on software and 14 percent on hardware. Among other categories, 9.3 percent will be spent on outsourcing staff domestically, and 3.3 percent of funds will go offshore. Networking will account for 10.8 percent of 2007 IT budgets. Consulting will occupy 9.8 percent of 2007 budgets.

Head count in IT is also expected to at least be flat in 2007. Among those surveyed, 36.7 percent of respondents said they will hire more people than in 2006, with 35.2 percent adding that the number of employees will be flat compared with 2006. The remaining respondents said they expect to employ fewer IT workers in 2007 than they did in 2006.

SIM also found that turnover rates were high (6 to 10 percent) for 22.7 percent of those surveyed, with 64 percent reporting turnover rates of less than 5 percent. To prevent those defections, IT managers are boosting salaries. A full 70.9 percent of those surveyed said they expect salaries in 2007 to top 2006 levels, and 19.7 percent expect flat salary growth. The remainder anticipate a decrease in salaries.

Risky Acquisition

ATI stumbles in Q4

Advanced Micro Devices acquisition of graphics chip maker ATI Technologies may be a good strategic move in the long run. In the short run, however, AMDs blushing bride is stumbling a bit.

ATI, which agreed to be acquired by AMD on July 24 for $5.4 billion, said on Sept. 6 that its fourth-quarter revenue of $520 million would fall short of Wall Street projections. The biggest reason: ATIs Intel chip set has unraveled faster than expected. When a company that counts Intel as a customer merges with AMD, chances are pretty good the Intel business will dry up. Meanwhile, handset sales were weaker than expected, but ATI said that situation was temporary.

"While we anticipated a decline in future Intel-based chip-set business following the announcement of the acquisition agreement with AMD, the decrease occurred much sooner than we expected," said Dave Orton, CEO of ATI, in a statement.

In a research report, Daniel Berenbaum, an analyst with Susquehanna Financial Group, said the ATI warning highlights the risk of making the deal work. "The ATI preannouncement highlights the complexities and attendant risks of an acquisition of this scale," said Berenbaum in New York. "It is clear that weakness in handsets and potentially graphics was also a significant contributor."

—Compiled by Larry Dignan

By the Numbers

BPO boom

$134.7 billion

Estimated size of the worldwide business process outsourcing market in 2006, up from 8.3 percent in 2005.

Source: Gartner