Tech sector on mend, but weak

Boston-area tech executives say the computer industry comeback is real enough, but not strong enough. Corporate customers are still holding back on big purchases, they say, and that means sluggish revenue growth and a reluctance to hire more workers.

"I think the faade of the tech industry is in much better shape; it's more presentable," said Berge Ayvazian, senior research fellow at Yankee Group, a Boston technology research firm. "But inside it's very hollow, and it's quite vulnerable."

Economic news from across the country supports the perception of a fragile recovery for the tech sector. Over the past week, a host of software companies have warned that second-quarter revenues would fall below expectations.

Veritas Software Corp., a major maker of storage software; database software firm Sybase Inc.; and business management software makers PeopleSoft Inc. and Siebel Systems Inc. were among those reporting weaker-than-expected sales.

And in a memo this week, Microsoft Corp.'s chief executive, Steve Ballmer, said the giant software firm plans to cut expenses by $1 billion.

In addition, many technology firms are still shedding workers. The outplacement firm Challenger, Gray and Christmas Inc. said yesterday that although job losses have slowed at electronics, telecommunications, and electronic commerce firms, second-quarter job cuts at computer companies have increased 179 percent over the first-quarter level.

Business isn't booming at Novell Inc., which moved its headquarters from Utah to Waltham this year and is trying to establish a new identity as a supplier of Linux software and applications.

"We still see it as a pretty tight environment," said Bill Smith, vice president of investor relations. He added that Novell has not seen the upturn in information technology spending "that other people have talked about."

Still, Novell reported higher revenue and a smaller loss for the second quarter, which ended April 30. Smith said Novell is attracting new customers because Linux offers higher security and lower cost than Microsoft Corp.'s rival Windows software. As a result, Novell is doing a little hiring, to ensure an ample supply of Linux experts. But, Smith added, "Novell's not in any broad hiring mode right now."

Neither is Centra Software Inc. in Lexington, which makes collaboration software for corporate conferences and training activities. Centra is hiring about 20 workers, partly because of a decision to close its North Carolina offices and move all product development to Centra's Lexington headquarters.

Paul Gudonis, president and chief executive of Centra Software Inc. and chairman of the Massachusetts High Technology Council, said that the overall technology market isn't strong enough to soak up all the unemployed high-tech workers in the state.

"I know there's hiring going on," Gudonis said, "but there are still a lot of unemployed and underemployed people out there."

Gudonis is confident things are improving, though. "I think the general economic climate is still pretty good," he said.

Still, Centra had a weak first quarter, with a sharp decline in software licensing revenue and a $3.1 million loss. Gudonis said the company expects to rebound as it focuses its sales efforts on big accounts.

Akamai Technologies Inc., the Cambridge Internet content distribution firm, has battled serious technical glitches in its global network, but delivered a solid first quarter. Indeed, during the first three months of this year Akamai made its first quarterly profit, with earnings of two cents a share.

Art Technology Group Inc. of Cambridge, which makes Internet commerce software, last week said revenue for the quarter that ended in June will fall short of expectations. But senior vice president of marketing Cliff Conneighton said sales are on the rise. "What we are seeing is a pretty good rebound in buying demand, " he said. "Our fundamental business driver is people doing business on the Internet, and there are more people doing business on the Internet every day." He said the company is seeking to hire about 20 additional workers.

At computer hardware companies, the upturn appears stronger.

Maria Tagliaferro, a spokeswoman for Analog Devices Inc. of Norwood, the leading maker of analog processing chips, said, "Our sales are up 32 percent year-over-year. That's a good growth year for us." And it compares to a 20 percent growth rate in 2003.

Nevertheless, Analog is not on a hiring binge. Tagliaferro said the company is "always recruiting out of the schools, to get some of the top scientific and engineering talent." But only about 100 of Analog's 8,700 workers were hired in the past year.

The message is mixed at EMC Corp. the computer storage company. Despite improving sales and earnings, investors are wary of continued restraint in corporate spending on large storage systems.

Teradyne Inc. of Boston, which makes semiconductor test equipment, is having a good year, said its vice president of corporate relations, Tom Newman. "So far, we're seeing a fairly strong recovery and we're ahead of the estimates that we'd made for the year," he said.

Hiawatha Bray can be reached at bray@globe.com.