Wall Street Beat: IT earnings mixed, but offer some relief

16.10.2008
Earnings season got under way with a vengeance this week, as bellwether companies such as Google, IBM, Intel, Nokia, Advanced Micro Devices, and eBay issued quarterly reports that, while mixed, offered some good news to IT investors trying to keep afloat in the middle of the worst economic crisis since the stock market crash of 1929.

The collapse of Wall Street investment banks coupled with a U.S. economy that will almost certainly be in recession in the last half of the year has taken both the tech-heavy Nasdaq and the broader Dow stock market indexes on a stomach-churning roller coaster ride over the past few weeks, with IT vendor shares hitting five-year lows.

Despite a cautious outlook from vendors, pockets of good news in the earnings reports suggest that macroeconomic problems will not hit IT as dramatically as the dot-com bust, when there were declines in IT spending and sales. While analysts have been predicting a slowdown this year into the first part of 2009, few have forecast an actual decline.

"In a worst case scenario, our research indicates an IT spending increase of 2.3 percent in 2009, down from our earlier projection of 5.8 percent," said analyst Peter Sondergaard in a on global IT spending issued by Gartner Monday.

On its part, Forrester is so far sticking to its forecast, made in September, that U.S. IT spending will grow at 5.4 percent from last year, and at 6.1 percent next year -- US$572 billion in 2008 and $606 billion in 2009.

In the current economic climate, however, nothing is certain. In a cautionary issued by Forrester this week, analyst Andrew Bartels said "with the financial crisis now spreading around the world, risks have grown that the U.S. and other major countries will experience a longer and deeper recession than we had expected. If so, the tech market would see several quarters of declines in purchases, not just two or three quarters with little or no growth in late 2008 and the first half 2009."