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The biggest risk for investors in technology, with stock prices up a whopping 55 percent this year, is they might be just a little too happy.

All the buzz isn’t without cause: Corporate technology spending could be set to rebound next year, cost-cutting is paying dividends, and dealmaking is back in a big way.

Those good vibrations will be tested next week, when some of the biggest names in technology, including Intel Corp, Google Inc, and IBM, post quarterly earnings.

“Clearly everybody expects beats in the September quarter,” said Broadpoint AmTech analyst Brian Marshall. “People are expecting to see positive business trends unfold and they’re looking for nice optimistic guidance in the December” quarter.

Such outsized expectations could trip up the industry. Reporting earnings that beat forecasts by, say, a penny per share may not keep investors happy, particularly if companies count on cost-cutting rather than revenue growth to get there.

The same goes for a solid, but unspectacular, outlook for the fourth quarter or 2010.

Call it the Blackberry scenario. Last month, the maker of the device, Research In Motion, reported quarterly profit of $1.03 a share, compared with analysts average forecast of $1 a share. But revenue came up short, its outlook disappointed investors, and the stock got crushed, dropping more than 16 percent.

WHITHER REVENUE … OR REVENUE WITHERS?

For the broader industry, one of the main concerns is where revenue growth will be found easy pay day loans. Overall corporate spending on technology is still at much lower levels than last year, and spending in Europe remains a big worry.

Indeed, only a handful of companies are expected to post revenue growth, including Apple Inc, Google, Verizon Communications Inc, and Amazon.com Inc.

Expectations for the technology industry have nonetheless improved over the past three months. In July, analysts expected tech companies to post a 20 percent decline in third-quarter earnings from a year earlier. Now, they expect earnings to slide just 14 percent, according to data from Thomson Reuters.

Stock prices underscore the optimism. The Morgan Stanley Hi-Tech index of major tech stocks is up around 55 percent this year and 19 percent since the beginning of July. While the Standard & Poor’s 500 has kept pace over the past three months, it is still up a more modest 18 percent this year.

Most likely, only hefty earnings beats or rosy forecasts will keep that sort of momentum going, analysts said.

Along with quarterly earnings, investors will be keen to hear any commentary on consumer demand ahead of the holidays and about a hardware refresh cycle by businesses that is expected to begin next year.

Helped by healthier consumer spending, global semiconductor sales rose 5 percent in August from July. That marked a sixth consecutive month of sequential growth. 

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Where does Canada stand with respect to the cost of wireless services? That question recently generated a spirited debate when the Organization for Economic Co-operation and Development released new figures that ranked it as the third most expensive developed country.

Critics pounced on the report, calling the results ridiculous and pointing to perceived flaws in the methodology.

Given that consumers have a hard time making sense of the different plans, options and hidden fees offered by Canada’s big three wireless providers (Rogers, Bell and Telus), it should come as little surprise that comparison of wireless services across dozens of countries is exceptionally difficult. Some countries charge consumers for both incoming and outgoing calls, while many others do not.

Moreover, hidden charges such as Canada’s system access fee – which can add as much as 25 per cent to a monthly bill – are often excluded from cost calculations.

While the debate will continue to rage, few currently hold Canada up as a model of wireless leadership. If not pricing, what should policy-makers and politicians be focusing on? Four main issues come to mind.

The first is competition, particularly among GSM providers.

While this will change later this year, for the moment Rogers is the only GSM provider in the country. Since GSM has emerged as the dominant global wireless technology, this has had big consequences for consumer choice and marketplace competition. Most new devices, such as the popular Apple iPhone, are available only for GSM providers, meaning that Rogers has enjoyed a virtual monopoly on the hottest devices.

Although the government has been reluctant to publicly acknowledge its competition concerns, recent policies suggest that it would like to see a more competitive environment.

The clearest indication came during the 2008 spectrum auction, in which it reserved some spectrum exclusively for new entrants over the objections of the incumbents.

There is another spectrum auction on the horizon that holds the possibility of opening the door to further competitors, particularly if Industry Minister Tony Clement is willing to revisit foreign ownership restrictions.

The auction also provides an opportunity to address the second issue – wireless net neutrality.

The current "walled garden" approach adopted by Canadian carriers in which they frequently control the applications that run on their networks has already attracted the attention of the CRTC. It has ruled that new regulatory requirements are needed to counter the resulting competition concerns.

Transparency in pricing should also be addressed. Canadian carriers continue to levy system access fees as a separate charge, despite the fact that they are nothing more than an additional cost to consumers. Moreover, carriers often bury significant usage restrictions in the fine print, leaving consumers without a true sense of the cost of their mobile phones. Clear guidelines on disclosures would enable consumers to better choose among providers.

Fourth, the length of consumer contracts further stymies competition. Canadian wireless carriers attempt to lock consumers into contracts for far longer than virtually any other developed country, with three-year contracts considered the norm. Several years ago Canada instituted wireless number portability that allows consumers to keep their numbers when switching providers. While designed to fuel greater competition, the policy has largely failed, owing to the combined effect of a single GSM provider (meaning consumers often lose their device when switching providers) and long-term contracts.

Debates about wireless pricing may be addressing the right concern with the wrong question. Instead, Canadians should be focused on competition, walled gardens, pricing transparency and a cap on contractual terms.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

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A federal appeals court upheld a 2-year-old ban on Monsanto Co.’s genetically modified alfalfa in a case a biotech food opponent calls a "turning point" in the regulation of such crops.

The ruling by the 9th U.S. Circuit Court of Appeals on Wednesday leaves Creve Coeur-based Monsanto with two options. It can appeal the case to the U.S. Supreme Court or hope for regulatory approval after the Agriculture Department completes a comprehensive environmental review.

"The ruling is disappointing, both to our company and the growers," said Garrett Kasper, a Monsanto spokesman.

However, Monsanto said a dissenting opinion by one of the three judges provides a "sound argument" if the case is appealed to the Supreme Court.

Monsanto got regulatory approval for biotech alfalfa in 2005. A year later, two alfalfa-seed farms and a coalition of environmental groups sued the government, challenging the decision to approve the crop without

requiring an environmental impact statement.

The groups cited concerns that conventional and organic alfalfa could be contaminated through cross-pollination, preventing crops from being sold. They also claimed biotech crops have led to overuse of herbicides and given rise to "super weeds" resistant to glyphosate, the active ingredient in Roundup.

A U.S. District Judge in San Francisco issued an injunction that banned the planting of biotech alfalfa after March 30, 2007. By then, more than 260,000 acres of the Roundup Ready alfalfa had been planted payday loan.

Monsanto intervened on the government’s behalf after the injunction, joined by Forage Genetics Inc., an alfalfa breeder that licensed the technology.

Nationwide, 23 million acres are devoted to growing alfalfa, most of which is used as animal feed.

But biotech opponents say the case is much broader because it marks the first time a thorough environmental review has been required for regulatory approval of a genetically modified crop.

Such a study will help regulators and the public understand any risks associated with crops that are genetically engineered to help farmers ward off weeds and pests, they say.

"This is a major victory for the public, for farmers and for the environment," said George Kimbrell, staff attorney for the Washington-based Center for Food Safety, a plaintiff in the case.

A draft copy of the environmental study on genetically modified alfalfa is expected later this year, according to the Agriculture Department. That will be followed by a public comment period and a final report.

Monsanto is still hopeful for government approval of Roundup Ready alfalfa and believes the results of the environmental impact statement could help with future reviews of new biotech crops.

Meanwhile, a lawsuit challenging the government’s approval of Monsanto’s Roundup Ready sugar beets is pending.

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Federal regulators are investigating the telemarketing practices of companies selling extended auto-service contracts — an industry that is largely based in the St. Louis area.

The Federal Trade Commission won’t confirm or comment on the investigation, yet it is something of an open secret.

In a news conference Tuesday, Sens. Charles Schumer, D-N.Y., and Mark Warner, D-Va., said the FTC soon would file lawsuits against service-contract brokers for violating telemarketing laws, including calling numbers listed on the national "Do Not Call" registry and cold-calling consumers’ cell phones — including the mobile-phone numbers for the senators themselves.

In a letter to Schumer dated Monday, FTC Chairman Jon Leibowitz wrote, "Law enforcement action in this area can be expected imminently compare car insurance prices." Schumer told the Post-Dispatch Tuesday that Leibowitz "basically assured me that they’re going after these guys."
The St. Louis area is home to at least 32 companies that sell extended auto-service contracts, and insiders say the area is acknowledged within the industry to be its hub. Consumers might not realize that, however, because unsolicited sales calls placed by so-called "robo-dialers" seldom show local numbers on Caller ID screens. Consumers are connected to area call centers only after they’ve shown an interest.

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Before the U.S. Commodity Futures Trading Commission starts scrutinizing the role that speculators may have played in driving up fuel and food prices, investigators may want to take a look at price swings in a commodity not in today’s news: onions.

The bulbous root is the only commodity for which futures trading is banned. Back in 1958, onion growers convinced themselves that futures traders (and not the new farms sprouting up in Wisconsin) were responsible for falling onion prices, so they lobbied an up-and-coming Michigan Congressman named Gerald Ford to push through a law banning all futures trading in onions. The law still stands.

And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics’ belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S payday loans. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April.

The volatility has been so extreme that the son of one of the original onion growers who lobbied Congress for the trading ban now thinks the onion market would operate more smoothly if a futures contract were in place.

"There probably has been more volatility since the ban," says Bob Debruyn of Debruyn Produce, a Michigan-based grower and wholesaler. "I would think that a futures market for onions would make some sense today, even though my father was very much involved in getting rid of it." 

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