With the lackluster economy hurting many corporations here and elsewhere, Wall Street is expecting the gloomiest round of third-quarter earnings from the nation's biggest businesses since 2009.
So far, analysts say, there is no evidence the Bay Area is falling off the same cliff.
"I think it's kind of hard to bet against technology companies in Silicon Valley," said Roger Kay, an analyst with Endpoint Technologies Associates, noting that in the past, "they have defied gravity pretty well."
But not every Silicon Valley company is putting up solid numbers. Intel (INTC), Hewlett-Packard (HPQ) and Applied Materials, for example, have issued worrisome financial predictions for the most recent quarter.
Despite rising stock prices, which on Friday boosted Standard & Poor's index for its biggest 500 companies to its highest close since 2007, The New York Times on Monday warned that corporate profits are faltering.
"Wall Street analysts expect earnings for the typical company in the S&P 500 to decline 2.2 percent in the third quarter from the same period a year ago," the first such decline since the third quarter of 2009, it said, citing data compiled by Thomson Reuters.
The newspaper also reported that profit margins for the 500 companies, which had risen steadily in the wake of the recession, peaked at 8.9 percent in late 2011 and are expected to fall to 8.7 percent in 2012. In addition, it said a survey by the advisory firm CEB found that just over half of managers at North American companies now expect production levels to increase in the next 12 months, down from 64 percent in the second quarter.
Moreover, corporate productivity gains have ebbed. After rising at an annual rate of 2.9 percent in 2009, and a 3.1 percent pace in 2010, productivity rose just 0.7 percent in 2011, according to the Bureau of Labor Statistics.
If businesses nationwide get so financially strapped they stop buying new computers, software and other tech equipment, it could slam many of the valley companies that sell those products, several analysts said.
Many Bay Area companies already have been affected by the slowdown, including Santa Clara chipmaker Intel. Long viewed as a key barometer for the tech sector, it sent tremors through the industry Sept. 7 when it cut its previous third-quarter sales forecast because of weakened worldwide demand for its microchips. Until its announcement, Intel had issued a string of earnings reports that exceeded analysts' expectations.
Sunnyvale chip company Advanced Micro Devices recently offered a third-quarter forecast that Bernstein Research analysts termed "very weak." And the $1.4 billion to $1.76 billion estimate that chip-manufacturing supplier Applied Materials of Santa Clara gave for its next quarterly sales was below the $1.94 billion most analysts had expected.
Other local firms that have offered disappointing predictions recently include Palo Alto-based HP, game companies Electronic Arts (ERTS) of Redwood City and Zynga of San Francisco, and San Jose-based software maker Adobe Systems (ADBE), which reports its earnings Wednesday.
Many of the scaled-back forecasts have blamed the tepid economies of Europe and China, where Bay Area tech companies do considerable business. But several experts said there is little cause for panic here.
"A number of the core companies continue to do at least reasonably well," said tech analyst Rob Enderle, noting that this region provides the sort of products that can be helpful in tough times.
"With technology largely seen as one of the ways you reduce costs and deal with an economic shortfall, the valley is actually in pretty good shape," he said.
Charles King, president and principal analyst of Hayward-based Pund-IT was similarly upbeat.
"I personally don't think there is great reason for alarm," he said. "I'm not seeing anything like the systemic problems we saw leading up to the dot-com bust. There's nothing that makes we worry that we're in for some sort of wholesale decline."
Contact Steve Johnson at 408-920-5043. Follow him at Twitter.com/steveatmercnews.