Wall Street Beat: Confidence buoys tech despite turmoil

Industry insiders remain hopeful that tech companies won't be dragged down as Wall Street giants collapse.

Even though a smattering of IT vendors including Dell and Nortel issued earnings warnings this week, industry insiders remain hopeful that tech companies won't be dragged down as Wall Street giants collapse.

After reports surfaced Thursday that the federal government is considering creating a repository for the failing banks' bad debt, the tech-heavy Nasdaq Composite Index jumped 5 percent, or 100 points, to close at 2199. The report about the repository seemed to allow underlying confidence in the tech market to push up even IT stocks that had been battered earlier in the week.

Dell shares tumbled about 10 percent Tuesday after it reported that demand for its products has dropped this quarter. Over the next two days, however, the shares recovered most of their value. Even Nortel shares, which lost half their value Wednesday after the company issued an earnings warning, rose again Thursday. Nortel said carriers are lowering capital expenditure plans, and some corporate users have deferred IT investments.

On Thursday, Dell shares rose by US$1.06 to close at $17.25, while Nortel's shares rose by $0.23 to $2.91.

The collapse of Wall Street investment banks, however, sent a shock wave through the technology sector. The banks are IT leaders due to the computing-intensive nature of financial services. Wall Street alone accounts for about 30 percent of the approximately $127 billion that the entire financial services sector will spend on IT this year in the U.S., according to Andrew Bartels, a principal analyst with the Forrester Group. Lehman Brothers, one of the investment banks that failed this week, spent $1.14 billion on IT last year alone.

But a bank's failure doesn't mean that its entire IT budget will vanish, Bartels pointed out. Banks that are folding or being bought out, like Lehman or Merrill Lynch, have IT systems that will keep running under different management.

"When banks merge they may end up using one e-mail system, but some trading platforms will still need to be supported," Bartels noted.

"From our perspective, the bigger issue is not what is happening on Wall Street but what is happening in the larger economy," Bartels said. A tightening of credit could curb both corporate and consumer spending, he noted.

That's one reason that Forrester earlier this week revised its U.S. IT spending forecast for 2009. That forecast now calls for 6.1 percent growth, down from its previous forecast of 9.4 percent. The downturn that Forrester and many other analysts thought would hit in the first half of 2008 is now expected to occur in the second half of the year and the first half of 2009.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Marc Ferranti

IDG News Service
Comments are now closed.

Latest News Articles

Most Popular Articles

Follow Us

GGG Evaluation Team

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell

LIFEBOOK UH574

The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi

STYLISTIC Q702

The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott

STYLISTIC Q702

My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Resources

Best Deals on GoodGearGuide

Compare & Save

Deals powered by WhistleOut
WhistleOut

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?