March 23, 2011 8:29 pm

Tech groups to count quake sales loss

IT hardware and software companies will in the next few weeks unveil the estimated hit to revenues of the devastating earthquake and tsunami in Japan, which came as local sales teams were preparing for the most important push of the year.

The first indication of the impact on tech companies that sell to Japanese companies or government agencies came late on Tuesday, as US software company Adobe slashed its forecast of overall revenue growth for its current quarter by nearly half to reflect the effects of the disaster in Japan.

According to analysts, sales to Japan have a disproportionately large effect on tech companies in the current quarter, given the timing of the country’s fiscal year, which closes at the end of March.

The effect on local sales is a further blow alongside the supply-chain problems caused by the disruption to component suppliers affected by the disaster.

Buyers of IT hardware and software tend to spend more heavily at the close of their fiscal year, as they use up the remains of their IT budgets for the year rather than lose them. The expected loss of this so-called “budget flush” was one reason listed by Adobe for its caution about the outlook in the coming weeks.

The US company, which makes desktop programs for creative professionals as well as the Acrobat document software, said it expected to lose $50m in sales, or a third of what it had expected from Japan this quarter. That would leave it with revenues of $995m at the midpoint of its forecast range, sharply cutting its overall growth rate from an expected 10 per cent for the quarter.

Adobe executives said it was too early to tell whether the lost sales would be recovered in coming months or whether the effect of the downturn would be longer lasting.

Overall, software companies that rely on sales to businesses and government customers generate 5 per cent of their sales from Japan, according to analysts at Barclays Capital, though for some, such as Adobe and Autodesk, the figure is 10 per cent or higher.

Japan also consumes about 15 per cent of the world’s semiconductors, Morgan Stanley analysts said, while tech research firm IDC had earlier forecast that the country would account for about 12 per cent of the $12.5bn global server market this quarter.

With buyers distracted by the need to deal with the crisis, earlier indications suggested a dent to server sales this quarter, though the real extent of the disaster would not become apparent until the following quarter, said Jed Scaramella, an analyst at IDC.

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