The recession pulls the plug on tech
On December 1, the U.S. National Bureau of Economic Research made it official: The American economy has been in a recession since December 2007. The tech sector is not immune. The conventional wisdom until the end of 2008 was that since corporate IT budgets were slashed after the dot-com bust, there isn't much left to cut. Therefore, the thinking went, the tech sector will suffer a sales slowdown but not an actual decline. However, market watchers are hedging their bets, revising expectations and in some sectors of the tech industry, such as PC and mobile devices revenue, forecasting global declines. Tech companies are cutting revenue forecasts and their share prices have sunk to levels almost as low as during the dot-com bust. Forrester Research in December slashed its forecast for overall U.S. purchases of IT goods and services from 6.1 percent to 1.6 percent growth in 2009. Market analysts are still saying that 2009 will end up in positive territory for tech overall because the recession is expected to end after another quarter or two. But if that does not happen, look for some vendors to go the way of the now-defunct investment banks.
HP Gobbles up EDS
Hewlett-Packard's announcement in May that it would acquire IT outsourcer Electronic Data Systems for US$13.9 billion was a big deal not just because large acquisitions became relatively scarce in a year of contraction. With the acquisition, HP will challenge IBM in services, consolidate its position as the world's top IT company, and expand its portfolio as a further hedge against an IT market that is likely to decline globally for several quarters. HP services accounted for 16 percent of its 2007 revenue of $104 billion, while IBM generates more than half its revenue from services. EDS will expand HP's consulting and outsourcing capabilities, bringing it to the number two spot in services worldwide behind IBM. With the EDS acquisitions under its belt, HP expects revenue between $127.5 billion and $130 billion for the year, compared to IBM's expected $105 billion.
Microsoft chases Yahoo