Downturn Tests Technology Sector’s Resilience

12 Nov Downturn Tests Technology Sector’s Resilience

Washington Post, By Peter Whoriskey, November 12, 2008
Technology companies often boast that they can easily weather an economic downturn because their products can help people save money. But in the ongoing global crisis, some of them are getting hammered. Nortel Networks on Monday posted a third-quarter loss of $3.41 billion, reporting a sharp drop in sales. That news follows a report last week from Cisco Systems that its orders in October had fallen 9 percent over last year. And with executives throughout the industry bracing for trouble, the research firm IDC this week cut in half its previous global forecasts of spending on information technology. “Everyone is expecting the worst, and when they do, they stop spending, and it just becomes a self-fulfilling prophecy,” said John F. Gantz, IDC’s chief research officer and senior vice president, echoing analysts’ remarks about other sectors of the economy. He said the forecast for tech spending had to be altered because of the changing forecast for the broader economy. “Until September, most forecasts were that 2009 would be better than 2008, and then . . . boom,” Gantz said. “Now 2009 will be worse, and the only question is how much of a turnaround we get in 2010.” Even so, there is some disagreement over the magnitude of the impact that the weakening economy will have on technology firms.