Tech Still Whistling Past Economic Woes

Tech sector analysts continue to predict that the country’s deepening financial woes will have little to no effect on the IT industry, pointing to no downturn in IT spending and a continuing, vibrant acquisitions market.

“Tech is still maintaining its strength. We’re still seeing lots of deals getting done,” Ward Carter, president of mergers and acquisitions advisory company Corum Group told eWEEK March 17. “Further softening in the economy is another question, but I haven’t seen it in IT spending projections.”

Carl Steidtmann, chief economist for Deloitte Research, agreed.

“Outside of financial services and credit sectors, not all that much has changed,” said Steidtmann “Tech firms are very liquid with strong balance sheets. We’ve had a credit crunch since at least August and the housing market [has been down] for almost two years now, but there really hasn’t been a spillover into tech.”

Both Carter and Steidtmann said despite the slowing economy, companies will still need technology in the future as much as, if not more than, they do now to compete effectively. New applications make companies more efficient and help them make better use of resources.

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Last week, for instance, IDC predicted PC shipments are expected to grow more than 12 percent this year. In its March 12 report, IDC is predicting that vendors will ship about 302 million laptops and desktops worldwide in 2008, an increase of 12.8 percent from 2007 when OEMs shipped more than 267 million PCs.

“Companies know they have to have that IT to keep up with competitive pressure,” Carter said. “For mission critical projects that generate tremendous efficiencies, you have to have the IT.”

Even the slumping economy’s effect on the ever weakening dollar works to IT’s advantage, Carter and Steidtmann said. Although the dollar has been declining for more than 36 months, IT companies have prospered during that period. Companies with a broad global reach tend to believe in maintaining highly diversified investment portfolios.

“The weaker dollar helps IT, no doubt about it,” Steidtmann said. “Technology is a big exporter, so their products fare well in international markets.” Carter added, “The strong Euro translates into more dollars.”

Nor does the current state of the economy seem to be slowing the tech deals that are making headlines on a daily basis. Carter points to the rash of Microsoft acquisitions since the beginning of the year as an example of a company taking advantage of the market.

“It’s certainly a buying opportunity for strategic investors,” Carter said. “After all, you want to buy at the bottom, not the top.”

Steidtmann also dismissed notions that the road signs point to a tech crash similar to 2001-2002. “Back then, there was overspending in IT and then it turned out the financial bubble was also in tech,” he said. “Those two factors aren’t in play this time.”