The financial news for IT just keeps getting worse, with bellwethers like Intel cutting revenue guidance, shares of high-flyers like Google sinking to multiyear low, Sun slashing up to 18 percent of its workforce, and market researchers at IDC and Citigroup slashing forecasts.
The conventional wisdom up until now has been that since corporate IT budgets were slashed and stayed lean after the dot-com bust, there isn't much left to cut. Therefore, the thinking goes, the tech sector will suffer a slowdown but not an actual decline. However, market watchers are starting to seriously hedge their bets, revising their official expectations and in some cases forecasting declines.
[ Learn more about how the financial crisis is affecting IT and the high-tech industry, plus what IT can do to help, in InfoWorld's special report. ]
Before a Thursday afternoon rally, probably caused by traders seeing opportunities to snap up historically low shares, the tech-heavy Nasdaq closed Wednesday at 1,499, a new low for the year and a level not seen since the tail end of the dot-com bust five years ago. The new low point marked a stunning loss of confidence in the tech sector. Shares of Google sank to below $300 for the first time in three years.
Sun's announcement Friday that it will cut up to 18 percent of its worldwide workforce to curb costs in the face of tough economic times put a cap on what was a tough week for tech. Sun plans to slash costs by about $700 million to $800 million annually, and lay off 5,000 to 6,000 employees. In an effort to emphasize the company's considerable intellectual property in software -- and de-emphasize hardware -- the company is also reorganizing and plans to form two new business units and a new group within Sun's Systems business.
Two weeks ago, Sun blamed the downturn in the financial sector for a $1.68 billion quarterly loss. The collapse of the U.S. investment banks has eliminated what was Sun's customer stronghold. Sun shares immediately started trading lower Friday morning.
Market analysts have continued to downgrade tech shares this week. Goldman Sachs downgraded Dell to "sell" from "neutral" based on expected declines in margins and earnings. Dell remains highly dependent on sales of hardware, which is typically the first thing cut when IT budgets are trimmed.
Goldman initiated coverage of Palm with a "sell" rating. It sees limited chance for a company turnaround since increasing competition will likely drive market-share losses, and the company's new software platform strategy remains unproven.
Credit Suisse cut its share price target for Apple to $120 from $135 to reflect a more conservative outlook for the personal computer industry.
One sign of tough conditions for hardware was Monday's announcement from electronics retailer Circuit City that it had filed for bankruptcy protection to try to turn around its bleak financial position.
Get the independent advice and expertise you need to support a virtual workforce.
The increase in Linux popularity has increased the frequency and sophistication of malware attacks. Read this 2 page white paper now to learn how you can protect your Linux environment with real-time protection that is certified by all major Linux vendors.
Download now »
Ensuring acceptable application delivery will become even more difficult over the next few years. As a result, IT organizations need to ensure that the approach that they take to resolving the current application delivery challenges can scale to support the emerging challenges. This handbook elaborates on the key tasks associated with planning, optimization, management and control and provides decision criteria to help IT organizations choose appropriate solutions.
Download now »
A common misconception is that mid-range storage requirements are dramatically different than that of a larger enterprise. Mid-range storage users may require less capacity, but they have similar functionality and management requirements. This ESG paper examines mid-range storage needs and reviews a new solution that adjusts size while retaining value, performance and functionality.
Download now »
Recommend This
