Profits see biggest drop in 10 years

Bloomberg News

NEW YORK — U.S. companies had their biggest drop in quarterly profits in 10 years as demand for products ranging from chemicals to computer equipment plunged. Analysts forecast another decline this quarter.

"The numbers are just hideous," said Maureen Allyn, chief economist at Zurich Scudder Investments, which manages $345 billion in accounts. "Some of these companies have 30 percent lower sales. There's not an executive on the planet that can protect profit from that."

Second-quarter profit fell more than 16 percent, based on 424 companies in the Standard & Poor's 500 Index that have reported. That was the biggest decline since an 18 percent drop in the third quarter of 1991, according to Thomson Financial/First Call. Profits decreased 6.1 percent in the first quarter.

JDS Uniphase Corp., the largest maker of fiber-optics equipment, had a fiscal-year loss of $50.6 billion, the largest in U.S. history. Intel Corp., the biggest chipmaker, said quarterly profit fell 94 percent. Sun Microsystems Inc. had a loss in the latest quarter on its first sales decline since at least 1992.

Oil and health-related companies were among those that reported profit growth. Second-quarter profits at the three largest U.S. oil companies rose as natural gas prices increased.

Average earnings in the third quarter are projected to fall by 12 percent from a year earlier, according to First Call. Fourth-quarter profit is expected to increase 0.1 percent. The estimates, as well as the latest quarter's results, exclude one-time items.

Some analysts said estimates for both quarters will be reduced in the next few weeks.

"It feels like a recession right now for a lot of companies, said George Mairs, president of Mairs & Power Inc., which manages $1.3 billion. "For the first time in years, there's a lot of uncertainty about the economy."