No slowdown for US tech industry

No slowdown for US tech industry

AT&T, Apple, Microsoft and others report strong demand, remain optimistic

One reason enterprise IT sales remain solid is that vendors are hawking wares such as virtualization and utility computing that help corporations save money and increase productivity.

"Companies still seem to be willing to invest in technology when it relates to cutting costs,'' Morningstar's Hanna says, pointing to IBM's strong sales of mainframes and services designed to help their customers consolidate data centers and servers.

For example, Mark Tirschwell, CTO of Wall Street Systems, expects to expand his firm's use of Savvis' utility computing and data center services in 2008.

"We haven't seen anything yet'' in terms of a macroeconomic impact on the company's sales of software to the financial services industry, Tirschwell says. "But based on the fact that everybody is going to be scrutinizing costs if the economy slips into a recession, I expect our value proposition -- especially for our software-as-a-service offering -- to carry more weight.''

Meanwhile, new technologies such as mobility and Web 2.0 social networking features are engaging more consumers online. Companies can't afford to skip investments in these kinds of technologies without putting their businesses at risk, experts say.

"The big trend I'm really interested in is Web 2.0 tools in the enterprise,'' USF's Allen says. "It's not big money yet, but that's a huge trend in terms of changing the way the business operates not just in terms of communication but also in collaboration.''

Allen also is upbeat about corporate investments in data mining software.

"It's not just a story of retrenchment and doing transactions cheaper than before and consolidating systems,'' Allen says. "Companies are sitting on mounds of data. With business intelligence and analytics, you invest a little and get a whole lot back. I don't see that trend stopping anytime soon.''

No deja vu of 2002

Experts see many differences between how the tech industry is responding to this economic slowdown compared with the last one in 2001 and 2002. For example, this downturn is being led by the housing industry, while the last recession was driven by the dot-com bust and affected the tech industry first.

"Back then, company value was based on the stock price and now it's based on revenues,'' Allen says. "We used to talk about the New Economy. Now it's the Real Economy. . . . You see over and over again that the financial results in the tech industry are based in reality. They're not based on speculation about share prices or hopes that you can monetize visitors to your Web site.''

Experts say one reason the tech industry should fare better this time around is that it isn't as overbuilt. There's not as much excess in stock prices, venture capital investing or corporate IT spending as there was in 1999 and 2000.

"I think this downturn will have less of an impact on the tech industry because we're starting at much lower levels,'' PWC's Lefteroff says. "You don't have the excesses that have to be cleaned out first. The start-ups funded now are companies that have reasonable prospects for developing a good business.''

Hanna says that during the 2001/2002 recession, demand for technology in emerging markets wasn't as strong as it is today.

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