Corporate Profits Reflect Asia Woes

Weeks after rippling through the stock market, the distant turmoil in Asia is starting to turn up in the bottom lines of some of the country’s biggest companies.

Software maker Oracle’s multibillion-dollar wipeout this week has been the most stunning example, but other companies ranging from Coca-Cola to J.P. Morgan are showing signs of damage.

“What (Oracle) said is what we should expect with a slide in Asia,” said Allen Sinai, chief global economist at Primark Decision Economics. “The U.S. will not escape.”

While a small part of overall profits for many U.S. companies, much of their recent growth has come from the region.

But demand for Western goods and investment will soften next year specifically because of Asia’s economic slowdown while spending by private households falls because of the fall of Asian stock markets, according to a United Nations report released Monday.

“The crisis is not yet over,” said the survey by the Economic Commission for Europe. The near-term outlook for the global economy, according to the survey, “is now surrounded by a large margin of uncertainty on account of the turbulence” in financial markets.

Stock in Oracle, which makes database software used by businesses, fell 29 percent Tuesday after it released disappointing profit news, knocking $9 billion off its market value. The company blamed Asia and the strength of the dollar, which makes it harder to sell its software overseas.

Whole industries are vulnerable to the Asian contagion, from high technology to aluminum to beverages, insurance, banking and restaurants.

Slowly but surely, U.S. companies and analysts are starting to publicly tally losses initiated by the Asian currency crisis that began in the summer:

Coca-Cola took a nearly 4 percent hit on its stock Monday after some analysts lowered their earnings estimates for the company, which derives 70 percent of its operating income from outside the United States, with 30 percent over-all coming from Asia and the Middle East. Analysts revised their estimates based upon the dollar’s strength against the Japanese yen and the German mark and how that translates to less profit.

Boeing Co. expects Asian airlines to delay deliveries of 20 jets for each of the next three years. That’s based upon Boeing’s forecast on Asian economic growth and previous delivery trends. Boeing had no projections on its revenue growth because of the delays.

AEA Investors Inc., a New York investment firm, was buying Corning Inc.’s consumer housewares division but called it off Wednesday after concluding that the Asian currency market turmoil could lower sales next year. Fourth quarter sales already are soft.

J.P. Morgan said Wednesday that earnings during the first two months of the fourth quarter were lower because of unsettled global market conditions. The company, which derives 40 percent of its revenues from cross-country trading, fell 4 percent hit Wednesday in the stock market.

Losses caused by the Asian crises can come in other forms.

Hoteliers and casino operators foresee two types of losses through tourism. They’re betting there will be fewer Asian tourists roaming New York, Chicago, Detroit and the entire western United States.

But there’s also the loss of the highrollers, the guys who plunk down thousands and millions at a time at the blackjack, baccarat and poker tables. Alan Feldman, a vice president at Mirage Resorts in Las Vegas, estimates that up to 50,000 Asian highrollers pad through Las Vegas each year. Some of them, clearly, are not returning.

“What we are saying to Wall Street is that logically there will be some impact next year,” Feldman said. “It’s difficult to know what the actual impact will be.”