Strengthening Dollar Threatens Tech Revenues

(MoneyWatch)  Last week, the Financial Times pointed out that U.S. high tech companies doing significant business overseas had seen significant revenue lifts from the falling value of the dollar. Presumably each pound, euro, or yen paid for goods and services turns into that many more greenbacks. So as the dollar has been strengthening some, I've finally had a chance to look at a few corporate filings to see just how big the effect could be. And it's pretty noticeable.

In its fiscal year to the end of May, roughly a quarter of Oracle's reported revenue growth came from foreign currency translation effects, as the falling dollar increased the value of its overseas sales.

But Oracle is hardly the only company ironically riding high on the dollar's ebb tide:

• According to the report, Google's revenue growth in the second quarter fell 20 points to 43 percent "but would have slumped to 36 per cent had it not been for a weaker dollar." At last count, according to Google's own financial statements, a full 52 percent of the company's revenue came internationally, making it even more exposed to changes.
• How about Microsoft? Its 2008 10-K noted the following: "Foreign currency exchange rates accounted for a $1.6 billion or three percentage point increase in revenue during the year." So of the 18 percent year over year growth 2008 say, a full three percent came from currency effects.
• For Apple, in the nine months closing at the end of this June, $34 million of net income was due to currency translation, or about 0.9 percent.
• HP's third quarter net revenue growth was ten percent year over year; in constant currency, it would have been five percent.
• In the first six months of 2008, eBay saw a net income of just over $920 million. Currency translation added a full additional $230.2 million.
• In three months ending August 1, 2008, the impact Dell saw of a weak dollar was about four percent, according to its 10-Q, though "we generally pass on foreign currency benefits to customers through lower local currency pricing because we typically manage our business on a U.S. dollar basis."

Increased revenue and net are not the only possibilities. Cisco's FY 2008 annual report, filed last week, noticed that not accounting for currency hedging activities, R&D, sales and marketing, and G&A expenses increased by $332 million, or about 2.5 percent, from 2007 to 2008. eBay's April, May, and June saw a net income loss of about $38.4 million. That period coincided with some strengthening of the dollar. Of course, as energy prices drop and, hopefully, credit loosens, companies may be willing to pay for strengthening of the dollar.