The new challenge for tech companies: currency fluctuations

Bolaji Ojo, EE Times
(05/02/2008 10:17 AM EDT)

In the first quarter, currency fluctuations lifted margins at Apple, clobbered profitability at STMicroelectronics, derailed carefully calibrated operating earnings projections at Infineon and gave executives at wafer foundry TSMC such a fright that they promised firmer pricing schemes.

At the beginning of this decade, the U.S. dollar and the Euro were at parity, and fluctuations in the values of the two currencies were limited and unremarkable. Top executives paid scant attention to the foreign-exchange markets and consigned the strategic steps needed to contain the negative effects of currency fluctuations to financial advisers.

No tech executive whose company operates internationally can afford such complacency any longer.

The fluctuating currency market is affecting more than fiscal results; it is also skewing competitiveness and preoccupying corporate boards as top management confronts one more issue over which it has limited control.

In the first quarter, the pains and gains from the weakening U.S. dollar were unevenly distributed; but across the high-tech sector, executives are wandering into a topsy-turvy currency world that few are equipped to manage. That's concerning, because what happens in the forex markets can be critical to companies' results and to how investors rate them in equity markets.

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