Technology buyers say they will continue to invest according to a story from The New York Times. Microsoft reported record earnings last week, and Chris Liddell, Microsoft CFO, gave stock analysts strong "guidance" for the coming year, saying “We have not seen any significant spillover for an economic slowdown in the U.S.”
The NYT article cites an IDC study and concludes; "There will surely be belt-tightening, and cuts may be sharp in some industries, especially the financial sector. Overall growth in technology spending may fall from 7 percent last year to 4 percent or less this year, according to estimates by IDC, a research firm."
Erick Schonfeld at TechCrunch predicts that a tight economy will actually benefit Web 2.0 companies and SaaS based software. Erick says
"While a belt-tightening might not be good for the IBMs, Dells, and Oracles of the world, Web 2.0 companies should do fine—even thrive. All of those Enterprise 2.0 startups out there, or even Amazon trying to sell Web-based computing infrastructure, are actually at an advantage. Customers are more likely to try cheap cloud computing when they can no longer afford the alternatives."
What about advertising? A few weeks ago I asked "Will Advertising Revenues Drop In A Recession?" Marketing and advertising is usually the first thing to get cut when the economy sours. Display advertising will probably feel the pinch, but online Cost Per Click (CPC) ads will look more attractive to advertisers.
With CPC ads you pay nothing unless someone clicks on your advertisement. This is a huge advantage for advertisers who really want to increase sales but can't afford to gamble on a display ad. CPC ads are easily justifiable and trackable. In a recession, with declining sales, there is enormous pressure to do anything possible to get sales moving. CPC advertising, principally on search engines, will be very appealing to advertisers.
Google and Yahoo report earnings this week. Of course these earnings will cover the 4th quarter of last year. What analysts really want to hear is their outlook or "guidance" for the coming year.
Apple reported great earnings last week, but said the future looked soft. Apple stock was crushed by investors. Microsoft stock was up in a very down market. One thing about the stock market...every day is a new day. Last week doesn't matter. The stock market is always looking forward.