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Technology supply chains set for 'tougher' times

Technology firms should brace themselves for "tougher" supply chain conditions ahead, a new report warns.

In a recent analysis of tier-one technology companies' recent financial results, analysts Barron's warned that the global tech supply chain was set for "difficult" times.

"The slowing upside momentum at H-P and NetApp, combined with disappointing outlooks from Cisco, Dell and Brocade tell us that the upside in the tech supply chain will become more difficult over the next few quarters," according to Barron's.

"The January quarter sales outlooks for these five companies in aggregate totaled $60.47bn, below the Street estimate of $61.94bn by 2.4%, or $1.47bn, highlighting deteriorating demand as we exit the year."

The warning comes after Hewlett-Packard reported October quarter results showing that its revenue upside had deteriorated. In addition storage company Brocade Communications Systems reported a relatively strong October quarter but a weaker-than-expected January quarter outlook.

"Flextronics International is betting on big program ramps with H-P in the notebook/original-design manufacturer (ODM) market; however, continued challenges in the industry could make the company's notebook/ODM revenue objective of $4bn in fiscal 2012 more difficult to achieve, in our view. Finally, Imaging and Printing Group (IPG) came in line with historical trends (up 13% quarter-over-quarter). Flextronics, Jabil Circuit (JBL) and Celestica (CLS) are important suppliers across H-P, including IPG programs," Barron's warned.

The report noted that over the past two weeks, Cisco Systems, Dell and Brocade have provided worse-than-anticipated January revenue forecasts, while NetApp (NTAP) was in line and the upside at H-P (HPQ) slowed. It went on to point to weakness in H-P's Personal Systems Group (PSG), which came in "well below historical patterns" (average of up 13% quarter-over-quarter) due to weakness in low-end consumer notebooks and issues in China.