Tech Market Quakes After World Bank Report


Any tenous investor confidence in technology stocks took a dive yesterday, as the World Bank said it expected the global economy to shrink 2.9 percent this year, an increase over the 1.7 percent contraction it predicted in March. It also called the decline in industrial output a "collapse," reports Computerworld. Thanks, World Bank. The article also contains some ugly numbers about global PC and server sales.


Wall Street's reaction: drops in bellwether tech stocks, including IBM (down 1.29 percent), Cisco (2.7 percent), HP (1.59 percent) and Oracle (3.34 percent).


Seems like a long, long time ago since Google and IBM both beat analysts' expectations in 2008's fourth quarter. I certainly feel more than a little naive, having implied in a post from last March that the tech industry appeared to be somewhat impervious to the recession.


Since then, IDC, Gartner, Forrester Research and pretty much every other analyst around have lowered their IT spending estimates. Earlier this month Gartner reported that 42 percent of CIOs it surveyed said their companies reduced IT budgets in the first quarter. Many of them also said intiial OKs of 2009 budgets had been withdrawn.


If there's a bright spot in the Computerworld article, it's that curent conditions still don't seem as bad as the 2002 dot-com bust. According to a Computer Economics survey, 45 percent of IT managers are increasing operational spending this year. That's a lot less than the 60 percent to 80 percent who increase such budgets in a "normal" year, but more than the 36 percent of North American companies that did so in 2002.


Said Computer Economics President Frank Scavo:

I don't see a systemic collapse.

Scavo did caution that companies may be forced to make additional cuts in the coming months. While some tech vendors say they think the economy has bottomed out, others are not so optimistic. Remember, though, a recession can be an opportune time to push the kinds of organizational changes that rarely happen in a better economy.