Hard Facts: Corporate Profits

Corporate profits totaled $70.2 billion in the second quarter of this year, up 8 percent from year-earlier levels. The profit picture is undeniably improving for U.S. companies; the increase marked the first year-over-year gain since the third quarter of 2000. Even so, the increase was weak by historical standards and was mostly due to continued cost-cutting, as corporate revenue rose by a scant 1 percent in the second quarter.

Of the 24 industry sectors CRN studied, 22 showed a profit in the second quarter of 2002; only electric and electronics products, and the telecommunications sector, showed losses.

Critically for the channel, however, profits were heavily concentrated in only a few industry sectors, according to the data. Non-bank financial institutions, including insurance companies as well as savings and loans, led the way by racking up $17.6 billion in profits in the second quarter. Not surprisingly, the health-care industry was second with $13.2 billion. Banks, consumer products and office equipment rounded out the top five. Together, these sectors accounted for 82 percent of total corporate profits in the April-June period.

Solution providers might also want to keep an eye on sectors where profits might be smaller but are growing rapidly. The leisure industry is a good example. While profits totaled only $2.5 billion in the second quarter, this represented a 277 percent increase over the same period last year. Consumers, perhaps looking for an escape from the day-to-day worries of job security, stock market losses and war, continue spending money on high-ticket items. RV manufacturer Winnebago, for example, saw profits jump 45 percent in the second quarter, while Harley-Davidson recorded a 25 percent gain.