Will Wall Street sink tech?
Lehman Brothers (LEH) is going bankrupt, Merrill Lynch (MER) sold itself to Bank of America (BAC) and the markets had their worst day in seven years. But Wall Street's crisis isn't sinking tech. Yet.
Analysts on Monday said that while times are tough, big technology companies might continue to turn in decent sales and profits thanks to overseas sales. Some, like Sun Microsystems (JAVA), are more dependent on Wall Street than others, like IBM (IBM) and Hewlett-Packard (HPQ), which have customers around the world who can keep buying despite Wall Street's troubles.
That's not to say everything's hunky-dory. Financial services firms account for a whopping 18 percent of overall IT spending, according to Forrester Research, with Wall Street firms making up a third of that. That's a big enough chunk that tech firms feel the pain as spending slows down. And slow it will, experts predict – Forrester Research revised its I.T. spending forecast for the U.S. on Tuesday morning, saying it now expects 6.1 percent growth in 2009, down from an earlier projection of 9.4 percent growth.
The thing is, many financial firms had already cut spending way back, says Forrester analyst Ellen Carney – so it might not get too much worse. She expects firms to slash their spending on business consulting, and hardware purchases they can delay. "But they're going to continue to spend," she says. "They'll buy things that increase productivity, things that help them identify risk."
But tech's prospects could darken considerably if the banking collapse, whose effects have already spread to Europe, hits Asia. That's by no means out of the question. If credit-strapped U.S. consumers cut back on holiday spending, that will hurt Asian manufacturing economies. And if oil prices drop at the same time, that could be the end of spending sprees in Russia and the Middle East, high-growth areas that tech companies have relied on for overseas revenues.
How will we know if things are getting bad? If there's a canary in the coalmine here, it could be the PC business. In fact, on Tuesday Dell warned that global PC demand is softening. "The influence of emerging markets has spread the PC industry out quite a bit," says IDC analyst Richard Shim. "It's just a question of, will the economic situation in the U.S. spread out to other regions?" If it does, we could see big fourth-quarter earnings misses from the likes of Microsoft (MSFT), Intel (INTC), HP, Dell (DELL) and Apple (AAPL) – and a tech industry in a world of hurt.
Apple will never be able to hang. Their products are cute on the consumer side but will NEVER out-perform systems from Dell and similar brands. Dell and HP don't advertise near as much as Apple and never have, yet Apple doesn't even get 10% of their sales. I'm only talking about the consumer side; no serious company would use Apple for an enterprise solution.
"Dell, Microsoft, HP, etc. will see another reason for business becoming softer. It is simply the rise of Apple which is slowly but surely becoming the next giant of tech. I started to predict to friends last year that Apple will become the dominant force in tech within a decade. I have loved Apple products for close to two decades. Now having purchased an iPhone I am even more sure that Apple’s growth will be HUGE. The iPhone is not simply a phone but my second mobile computer which makes life much productive, rewarding, and lots of fun.
Posted By Ron Estrada, Greensboro, Georgia : September 16, 2008 11:24 am "
Typical Apple fanboy who has no idea how an enterprise infrastructure works. Apple may become the next giant tech company on the consumer side — and I stress the word 'may' — but they will never become anywhere close to mainstream with enterprise IT.
Apple is horrible when it comes to enterprise relationships. Their products are God-awful to integrate, expensive to buy and and giant headache to maintain. My company has stopped allowing purchases of any Apple computers because of the giant pain they are in every facet to support in an enterprise level IT infrastructure.
Get a clue before you go blow some more sunshine up Steve Job's hole. His ego is already big enough.
There is NO WAY that tech spending will decrease, the reason is incresing productivity demands the best software and hardware. It's that simple, but evidently the writer of the article only uses a word processor and doesn't understand the meaning of increasing productivity. I would bet that he/she is still using Wordstar on an old Sanyo computer! The article is a piece of ill-informed verbage.
How do you think contract assembly houses remain competitive? The total number of products built is essentially the same whether they are built in house or subcontracted, and someone needs to buy the manufacturing and logistics technology to do so. If anything, the IT requirements are greater in total with a subcontract model.
The need for tech to increase productivity has lessened with labor outsourcing. Perhaps abacus sales will increase.
what do you mean the tech stock haven;t been hit??? Intel has fallen over 20% over the last several weeks due to the bank crisis. Intel gets majority of their revenues from overseas.
Dell, Microsoft, HP, etc. will see another reason for business becoming softer. It is simply the rise of Apple which is slowly but surely becoming the next giant of tech. I started to predict to friends last year that Apple will become the dominant force in tech within a decade. I have loved Apple products for close to two decades. Now having purchased an iPhone I am even more sure that Apple's growth will be HUGE. The iPhone is not simply a phone but my second mobile computer which makes life much productive, rewarding, and lots of fun.
A number of these failed financial companies spent a lot of money on tech and with their dissaperance it will definetly affect the tech sector. What's worse is that tech venture capital will dry up, and once the economy slows down consumer tech spending will fall – which will have the biggest impact on the tech titans.