Tech trifecta: Intel, Google and IBM
Experts say there are growing signs that a turnaround is coming but quarterly results are still expected to be lousy.
NEW YORK (CNNMoney.com) -- Tech earnings season kicks off this week, with quarterly reports from industry giants Intel, Google and IBM, and investors will be hungering for signs that a turnaround is imminent.
"The second-quarter numbers, when they come out, are clearly going to be down for nearly every vendor [but] last quarter will be the last of the really big down quarters," said Forrester Research analyst Andrew Bartels.
Financial results for the April-June quarter are expected to be woeful. Thomson Reuters is forecasting a 24% drop in earnings for S&P 500 tech companies.
But that's still better than the overall S&P 500, which is projected to see a 35.7% drop in profits, according to Thomson.
Evidence of a tech sector rebound is starting to pile up. For one, over the past three months, the Nasdaq composite index -- often viewed as a gauge for the broader tech sector -- has surged 20%.
Also, a recent Gartner report showed that the long PC sales slump is slowing and will reach bottom in the current quarter. Forrester Research expects corporate tech spending to jump by year-end. And several new product announcements, not the least of which includes Microsoft's much anticipated Windows 7, are expected in the coming months.
As the signs continue to point toward a recovery, analysts say it will be more important to hear what the companies have to say during this reporting period than what the profit and revenue numbers show.
"The likelihood is that the sector will show signs of bottoming out, in particular in the fourth quarter," said Bartels. "There is still a strong inherent demand, as there are a lot of very attractive technologies out there -- not just the new things coming out like Windows 7, but also virtualization, cloud computing and new categories of software."
Here's a closer look at what to expect from Intel, Google and IBM:
Intel. Chipmaker Intel (INTC, Fortune 500) will be the first of the bunch to announce its earnings, reporting its second-quarter results after the closing bell on Tuesday.
The forecasts aren't pretty. Analysts surveyed by Thomson Reuters expect the company to say quarterly profit dropped 70% last quarter to 8 cents per share, on a 23% slump in revenue to $7.3 billion.
That wouldn't be much of a change from the first quarter, when Intel also posted a sharp decline in earnings and sales.
But in April, Intel Chief Executive Paul Otellini said better times were ahead, and called the bottom for both PC sales and the broader economy. Otellini went a step further in May, saying that second-quarter chip sales were faring better than expected.
"Intel is an early indicator of how the tech sector if faring," said Leslie Fiering, Intel analyst with Gartner. "That's why they're trying to expand their market, especially in a down [economy] like this."
Google. Search leader Google (GOOG, Fortune 500) is set to report on Thursday after the bell. Though results are expected to be better than a year ago, they are forecast to be slightly lower than last quarter.
Analysts predict Google will post a 4% rise in revenue from a year earlier, to $4.1 billion. Profit is forecasted to jump 10% to $5.07 per share. Compared with last quarter, however, sales are expected to be flat, and earnings are projected to fall 2%.
Ad sales, which account for 95% of the company's revenue stream, will likely see a slump as analysts anticipate a slowdown in growth of Google's paid clicks and amount of advertising dollars per click. Still, Google had managed to grow earnings in the first quarter, despite slumping advertising sales.
"Google is the 800 lb. gorilla in the ad market," said Carl Howe, analyst for Yankee Group. "I expect them to weather this storm, since the Internet segment tends to be bargain basement ad model, not building big brand campaigns that suffer during recessions."
At the same time, chief competitors Yahoo (YHOO, Fortune 500) and Microsoft (MSFT, Fortune 500) suffered losses in search ads.
IBM. Bellwether IBM (IBM, Fortune 500), also reporting earnings on Thursday, is expected to show a 2% rise in profit to $2.02 a share on a 12% drop in revenue, to $23.6 billion, year over year.
IBM has a finger in practically every tech pie except for consumer products. It is the largest server maker in the world, but recently has shifted its focus to tech services, as businesses deemphasize hardware and look to cloud computing and software as a service.
Analysts say IBM will continue to drive home solid results through the economic storm as it moves to stay ahead of market trends.
"IBM might top Google, in terms of percentage earnings growth," said Howe. "They made the right move into services at right time -- services businesses are doing better than others during the recession, because once you've gotten someone else to mow your lawn, it's hard to go back to doing it yourself." 
