June 26, 2022

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The tech giant is sounding the alarm with the dollar |  finansavisin

The tech giant is sounding the alarm with the dollar | finansavisin

Many software companies have been battered in the stock market this year as a result of high interest rates, very high inflation and tightening of monetary policy.

Now the companies have suffered another setback after the giant Microsoft earlier this week issued a profit warning and warned of more headwinds ahead, Bloomberg writes.

The more expensive US dollar is blamed on Microsoft, which had to lower expectations for the current quarter from a result of each. Share “at least $2.28” to “at least $2.24.”

“A strong dollar will be a recurring theme at many major software companies, most of which generate more than a third of sales outside the US,” said chief analyst Anurag Rana of Bloomberg Intelligence.

threatening margins

Last month, the US dollar index reached its highest level in more than two decades. A stronger dollar is expected to threaten margins for companies – already under pressure from rising costs.

Microsoft and other major tech giants — such as Oracle and Adobe — operate complex global operations and have greater exposure to foreign currencies, according to Bloomberg.

Salesforce released an optimistic forecast for the year earlier this week, but noted that the results marked the dollar. At the same time, the company warned that the problem would extend into the second quarter.

According to Wells Fargo strategist Brendan McKenna, companies like Salesforce, which have greater exposure to foreign exchange, need to consider hedging strategies – the so-called hedging.

He believes that the dollar will continue to rise against most industrialized countries, as well as developing countries, with a few exceptions.

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Cheap can get cheaper

Bloomberg writes that analysts are not currently concerned about the strength of the dollar, and are instead focusing on the resilience of companies’ core operations in an environment of decelerating economic growth.

But for some investors, it’s still too early to start hoarding software stocks:

– They’re more attractive than they used to be, but we don’t want to chase them because we think they’re a big deal so far. The cheap rate could get cheaper quickly in an environment where interest rates are rising, senior director Stephen Howedt at analysis house Key Private Bank tells Bloomberg.