Monday, 1 February 2016

The dollar impact of United States Science and technology company

Posted by doll on 06:51:00 with No comments
Many multinational corporations are subject to the effects of the dollar, one of the most obvious is United States technology companies. There is little evidence to suggest that the situation will ease in the short term. A year ago, currency market disadvantages have been hit Apple, industry giants such as Microsoft and IBM, and the latest quarterly results again highlight this situation. Google Alpahbet released today the latest quarterly results of the parent company, and their data will be affected.

The impact on Silicon Valley is particularly serious, because these enterprises in overseas hardware, software and services market is a huge success. S&P Dow Jones Indices estimated that United States 59% of the revenue came from overseas IT enterprises in 2014, while the standard and poor's 500-stock index that only 48%.

"I expect the industry will continue to be the areas most seriously affected. "S&P Dow Jones Indices analyst huohuade·xierwobulate (Howard Silverblatt) said," these companies in overseas market on a large scale. ”

Other issues such as the weak economy led to falling demand in the market for tech companies, products, thus further expanding the impact of exchange rate issues.

Last week, Apple is the most typical example. 66%, the consumer electronics giant's revenue came from overseas markets. The company said last week that the dollar's strength led to the company revenue losses of nearly 5 billion dollars in the December quarter. If excluding exchange rate fluctuations, the company revenue: US $ 80.8 billion, but only US $ 75.9 billion, resulting in an increase from 8% to 2%.

In addition to some hedging measures to deal with the rising dollar, but also said the company raised by Russia, and Brazil, and Turkey and other countries of the iPhone price to protect their profit margins.

Apple CEO Tim Cook (Tim Cook) that take into account the unprecedented, so it is necessary to take some drastic measures. He said the dollar this time against almost all currencies have experienced extremely strong State.

Apple estimates that since September 2014 Russia ruble by more than 50% Brazil real devaluation of more than 40%, CAD, Australia, and Mexico in Bissau and Turkey lira depreciated more than 20%. Apple September 2014 by overseas revenues of $ 1 million, converted by December 2015, it drops to $ 850,000.

"When currency fluctuations to the extent, and so for some time, our influence is quite obvious. "Cook said. He told analysts that, superposition effects of fluctuations in exchange rates and slowing economic growth, resulting in almost all countries of the world under attack.

Other technology companies also complain that exchange rate fluctuations have an impact on its performance in the last quarter. Microsoft's earnings call last week, the dollar led to the December quarter revenue reduction of about $ 1.9 billion. IBM thinks exchange-rate effects of approximately US $ 1.5 billion in the fourth quarter. Software maker Oracle said in December that in the quarter ending in November, currency effects reduced by about $ 540 million.

Most of these corporate profits can hedge against currency fluctuations, the resulting effect is in the process of sales via foreign currency into dollars. But analysts said that when buying United States commodities, a stronger dollar will also have a more serious impact, causing prices to rise. In this case, potential buyers might delay purchases, or find alternatives.

United States market-research firm Gartner expects the dollar to 2015, $ 217 billion impact on the global IT industry, even more than the 2009 financial crisis levels.

The latest changes also produced a number of winners and losers. For example, Amazon's cloud computing business to use overseas data center construction, the company therefore get the benefit in the fourth quarter. Meanwhile, the technology giant in other countries (including Germany software company SAP) also used higher-valued dollar selling when the financial interests.

Most United States companies are talking about adverse effects of the stronger dollar. Alphabet Monday earnings may increase the intensity of discussion on this issue. The company's Google and other businesses about 53% in the September quarter of last year's revenue came from overseas markets. They estimate the exchange rate of the quarter's revenue had a $ 1.3 billion negative impact, and the impact was 1.1 billion dollars in March and June.

Alphabet CFO Ruth • Paula Rath (Ruth Porat) in third-quarter earnings conference call mentioned 5 times on negative exchange rate effects. Forth quarter results released on Monday, analyst at Raymond James and Associates estimates, excluding hedging gains, dollar strengthens against the company when the revenue impact is approximately $ 900 million.

Problem is more complex, harder to adopt effective hedging measures, including forward contracts or option to purchase or sale of foreign currency. In many cases, corporate hedging instruments are unable to offset the negative impact of the rising dollar.

"These measures do not work, because the dollar is too rapid, scope is too wide. "Gartner analyst yuehan·lafuluoke (John Lovelock) said.

For example, the Alphabet and last October they hedged only negative exchange rate effects reduced by 300 million dollars in the third quarter. IBM also had the same problem, the company's CFO Martin application of lot-et-Garonne (Martin Schroeter) estimates that currency in 2016 to $ 1.3 billion negative impact the company's profit--of which about three-fourths fall from hedge gains reduced.

Specific to the March quarter of this year, Apple projected exchange rate will cause its revenues reduced by 4%. The company did not clearly impact of hedges in the December quarter, but said the company plans to continue hedging measures to cope with the rising dollar. The company also hopes to back some of the money from the dealer.

Apple to these overseas companies pay a lot of dollars, means that they can benefit from a stronger dollar. Apple says that they plan to use this as a bargaining chip to negotiate new agreements.

FiREapps monetary analysis services provider CEO woerfugang·kesite (Wolfgang Koester) that, because of the difference in interest rates, and costs related to currency forward agreement may rise, while those of currency option will synchronize with Exchange rate fluctuations. Despite its complexity, the coaster is said Google and other companies have developed sophisticated tools for hedging.


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