Is the tech sector weaker than we think?
Just last week, analysts were abuzz over buoying technology stocks: The tech-heavy Nasdaq hit 2,000 points on news that chip demand was once again rising. Philadelphia’s Semiconductor Index, the SOX, rose nearly two percent thanks to big gains by Intel, SanDisk, and Applied Materials.
But contrast that with the rest of the news we’re hearing, and something seems amuck. According to a The New York Times editorial, consumer spending has nowhere to go but up, indicating that the recession may have reached its bottom. But much of the nation continues to wallow in unemployment and foreclosure, and it seems that technology-related purchases on consumer goods must surely be one of the first things to go. It may also be one of the last things to come back. According to the Times, growth may flatline instead of dropping further; whatever pent-up demand we do see will probably go to essentials like cars, health care and home improvements–not iPods.
This weekend’s Washington Post featured a story on wealthy families that are trying to keep up with massive mortgage payments and lavish standards of living. When the rich do cut back, it seems to suggest, the first thing they cut is money spent on things that don’t appreciate in value. Namely, gizmos.
And from the breakfast table comes one more urgent need from a 10-year-old.
“At my birthday party, every single girl had a phone,” says Katie Steins, making the case that an enV2 phone with matching cover is just standard in her crowd.
Steins kneels down to face her daughter. “If you continue to tell the world how undesirable your phone is–it’s not a flip, it’s not a swivel, it’s not an LG–you will not have a phone.”
“Mom, did you know that if you are the billionth app loader on iTunes, you get a 32-gig iPod touch, a MacBook and a $10,000 gift card for iTunes?” asks Harrison, who is 12 and the oldest. Christian is 8 and often comes to dinner in a cape. Katie, in a Little Miss Lucky T-shirt, tries to hold her own against the two boys.
Back to school sales are predictably slow, and whatever requisite technology purchases fall into that category–laptops, for example–are being made at bargain-bin prices. The Times reports that retailers like Wal-Mart have been working with HP, Dell, and Toshiba to expand their lines of ultra-cheap computers. A 17-inch Toshiba notebook at Wal-Mart, the article notes, can go for as little as $350. At this point, it seems that OEMs are just trying to keep volume up, profit margins be damned. How much money can Toshiba possibly make on a $350 laptop? (Below: will Apple stores be empty this fall?)
Indeed, the market plummeted back to reality this morning with what MarketWatch called a “broad market sell-off” in the tech sector. As sugar-plum visions of next-gen BlackBerrys and Apple tablets dance across the news tickers, don’t be fooled: this year, the buyers may not be there.
For a more in-depth picture of life in the downturn, check out the interactive, consumer-oriented “Living with Less” package at NYTimes.com