November 17, 2008
Last week Sun Microsystems recently announced that it will layoff 15-18% if its workforce. The move is expected to save the company $700 million to $800 million. Intel announced its sales for the current quarter could drop 19 percent, and the week before, Cisco Systems announced that sales in its current quarter could drop 10 percent. Circuit City has filed for bankruptcy protection. Best Buy and Nokia are struggling too.
"The tech sector finds itself at the mercy of a double-barreled slump in both corporate and consumer spending caused by the housing decline and the economic crisis on Wall Street. Technology companies are also feeling the effect of frozen credit markets as business and government customers struggle to finance computer and software purchases that can run to millions of dollars," writes Ashlee Vance of the New York Times.
Some, like Ashok Kumar, an analyst with Collins Stewart think that this could be worse than when the dot com bubble burst in 2000. “Even during the 2000 bust, the decline was more measured,” he said. “This seems to be going into a free fall.”
Comments | 4 Total
November 17, 2008 at 12:13pm by Lynne d Johnson
During my commute this morning, I read, Tech Companies, Long Insulated, Now Feel Slump, and I have to say that this downturn -- as it brings in more and more layoffs in the tech sector -- is starting to smell a lot like 2001. And while the netbook -- the low-priced, lightweight, energy efficient laptops -- may save the holiday slump, along with sales of iPhones and G1's -- the growth there won't be what's expected either..
The true sign though: "Venture Capital Financing Slows Amid Economic Downturn," -- with less new businesses in the sector it's going to be a really hard 2009 in terms of employment in the space.
Sure, tech may not be hit as huge as banking, and still SV may some insulated from what's happening in NYC -- but we'll see what happens Black Friday. Expect the outlook for retail to be dismal. And then consider that most Black Fridays are driven by sales of electronics and computers, and the like.
November 17, 2008 at 12:23pm by Brendan Collins
The difference between the dot-com crash and the current crisis is the credit market - who's lending, who's not. After the internet bubble burst, banks were relatively unaffected, and things eventually got back into shape. This time's a little different. With a drastically reduced credit market, how can new companies climb out of the rubble if they don't have any funding?
November 17, 2008 at 2:40pm by Dale Thompson
Lynne and Brendan raise valid points. This crisis is definitely different than 2001 on two fronts; 1)it is rooted in the financial sector and 2) it is global in scope. Having lived through 2001 and the telecommunications bust, I can tell you that this time is different. Last go round I worked for an IT services and consulting company and shifted my personal focus from telecomm to outsourcing in the energy sector and things worked out ok. Not so during this crisis.
As someone who works with airline industry customers, I can tell you that the crisis is acute and deep especially with the cost of energy. And as we have seen, companies in all sectors that were just scraping by or were making enough to support inefficient operations are suffering a great deal. As for tech buys during the holidays, there is really nothing in the marketplace that will save the day. A lot of people like me plan to hold onto their old PCs (bought just after Windows XP came out), laptops (2005 vintage), iPods (classic), and TVs (DLP and LCD thank you very much). And as far as transportation goes my 2001 and 2005 vehicles are doing just fine. Not to mention how much fun we are all having riding the investment and housing market roller coaster. My spouse and I were looking at all the swell stuff for sale in the Herrington and Sundance catalogues we recently received and saying 'that's nice dear' as we keep the wallet closed.
Long story short...the tech sector is going to see tough sledding on all fronts and a smoother ride is going to be 1 to 2 years coming.
November 17, 2008 at 11:58pm by Vance Dubberly
Can't see this killing the Tech Sector like the bubble burst did. Ya gotta remember back then you had people making 100K a year just because they could spell HTML. The tech sector back then was mostly hype and speculation, that's true today only for a few companies. Two factors will save the tech sector this time around. 1) it's actually integrated into our daily lives for real we rely on high tech fore our real daily live now, 2) it'll be the way out of this crisis. There are two ways to put our economy back in order and neither of them have anything to do writing another check to the officers at AIG, or reducing interest rates ( haven't we been doing that for 10 years, isn't that what got us here? ). We can reinvent our infrastructure roads, electricity, water; and we can innovate. Both will keep high tech rolling along smoothly. I can't imagine consumer oriented technology will do great but engineering, energy, biotech, and all the stuff that goes into supporting that, communications, marketing, data analysis should do quite well. Hopefully we'll see alot of real estate agents and bankers living in cardboard boxes.