What do Google, IBM, Intel, and Caterpillar all have in common?
The majority of their revenues come from overseas, and all four companies beat analyst expectations and announced solid earnings numbers this week for the first quarter of 2008.
75 percent of Intel's sales are to customers outside the United States -- 50 percent to Asia, alone. Two-thirds of IBM's revenue comes from countries such as Brazil, Russia, and China. International sales of such big-ticket items as bulldozers and excavators accounted for 58 percent of Caterpillar's first quarter revenue. And Google, as noted here yesterday, depended on overseas ad-clicks for 51 percent of its revenue.
Wall Street has been heartened by these numbers all week -- the health of these bluer-than-blue-chip companies is soothing fears that U.S. economic woes will propel the stock market into full-on bear-despair mode. The U.S. may be entering a recession, but the rest of the world is still growing at upwards of 3 percent a year.
The optimistic way to look at this is that the U.S. is no longer the only locomotive pulling the world economy. Other nations are shouldering the load and providing the demand necessary to keep the global economy chugging along. A more pessimistic take is to wonder whether we're just getting a breather while the U.S. slowdown works its way through the global pipeline. A lot of those chips Intel sells to Asia are installed in computers sold to Americans. The excavators Caterpillar sells to Colombia are employed mining ore that is then exported to China to be incorporated in products that are sold to... Americans. So it's still too early to say whether the global economy will withstand an extended American slump.
A larger question would be how the success of these companies, and the ensuing giddiness in the stock market, connects to the livelihoods of average Americans. Globalization, this morning. is bolstering the bottom line for everyone who has money socked away in stocks -- whether via 401K, mutual fund, pension fund or other investment vehicle -- and that's an awful lot of people. But even while California-headquartered Intel and Google are going gangbusters, unemployment in California jumped from 5.7 percent to 6.2 percent, in just one month. IBM's hiring in Brazil and Russia, but not necessarily in Silicon Valley.
Taken in sum, we would no doubt rather have companies like Intel and IBM still making a profit than otherwise. But it's also easy to understand how citizens of Ohio could be looking at a 250-point rise in the Dow (an hour before markets closed on Friday,) based largely on American multinational overseas sales, and wondering, what's in it for me?
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