The technology industry is bracing for a new round of layoffs and cutbacks after the Sept. 11 terrorist attacks delivered a heavy blow to investor confidence and corporate spending.
Analysts fear that companies will further delay or eliminate spending on technology projects on a scale that will far exceed whatever money is spent replacing equipment damaged or destroyed in the attacks. Industry research firm IDC reported last week that what was previously its worst-case scenario for worldwide IT spending, is now its most likely scenario.
"The rebound we saw beginning in Q4 will be postponed a quarter or two," Chief Research Officer John Gantz said. "We believe that IT budgets next year will be at higher levels than this year, but that spending against these budgets will be postponed until businesses sense the economy is turning around."
Exactly when this turnaround will occur is anyones guess. Analysts said they now expect many tech companies to miss their financial targets for the third quarter, and targets for the fourth quarter will likely be revised downward. Software bellwether Oracle more or less confirmed this last week when it said it expects software licensing revenue to fall as much as 15 percent in the current quarter.
"Until the events of last week, we felt the second quarter would be about the same as the first quarter, with us bouncing along the bottom and with things not getting worse, but not getting better either," Oracle Chief Financial Officer Jeff Henley said. "But now, everything is a wild card. We have no idea how negative things will be in sectors like airlines or hotels."
Major carriers announced last week that they could be forced to lay off about 100,000 employees in the weeks ahead, and airline manufacturer Boeing said it may cut 30,000 jobs. The impact was also being felt in the online travel industry, where players such as Expedia, Priceline.com and Travelocity.com warned that revenue would be hit hard. Most online travel stocks fell by more than 50 percent last week.
According to the National Business Travel Association, 58 percent of travel managers expect to cut company trips during the coming months.
Not all technology sectors were hammered in the wake of the attacks. Audio and videoconferencing companies saw their share prices surge as businesses looked for alternate ways to hold meetings with clients and employees.
Virtually every company involved in the technology described a sudden upturn in calls from customers and prospects. "Some of these have come back and referred to ads we ran in 1999 and 2000," said NuVision President Ned Riley. "Whats interesting is they had video on the back burner, and now its moved to the front burner."
Security and disaster recovery firms also saw an initial bump in their share prices as they were bolstered by an increased focus on security, as well as the spread of the Nimda worm. However, by weeks end, most were fighting to hold on to early gains.
Senior Writer Richard Williamson contributed to this report.