Tech stocks are following financials into the toilet. Yesterday, Microsoft (NASDAQ: MSFT), the world's largest software company, said it was taking a look at hiring. That is probably code for the firm saying it plans to cut or level out expense growth.
According to Reuters, Microsoft said, "Given the current economic environment we are taking the prudent step of reviewing our hiring plans and will make some adjustments as appropriate."
There had been some hope that technology spending would be close to immune to a slowing economy. Recent earnings from Oracle (NASDAQ: ORCL) confirmed that. But, the rapid deteriorating of GDP improvement and employment are leading many analysts to think that economic conditions have gotten much worse in the last two weeks.
In just five days, shares of IBM (NASDAQ: IBM) are off over 12%. Shares in Hewlett-Packard (NYSE: HPQ) are down 8% over the same period.
Tech has been one of the rapid growing sectors in the economy over the past two years. If hiring stops for these companies, or if the industry goes into a cycle of layoffs, it could deepen the recession very quickly.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
10-04-2008 @ 11:44PM
Mike Sanders said...
I don't believe that IBM has fairly participated in this bear market... I would cautiously go short, here. HP has been pruned, has been doing all the right things, but systemic market factors have caused me to change from a 'BUY, to a 'HOLD...' In the next few months, after things settle (within and without), I'd start to accumulate HP, once again. Neither company will go away, but their will be a very prolonged transfer of business, talent and wealth, occuring here. When will HP eclipse IBM? No one can say, but 5 years wouldn't be an unreasonable estimate. Though the balance will tilt, both companies wil continue to grow, well into the future, assuming that the world doesn't come to an end... In that scenario (end-of-the-world) you want to be in gold... Invasion by aliens from another world? I'd stay with fixed income. Assuming that the world doesn't come to an end, or that we're attacked by visitors from another galaxy, a portion of your investment portfolio should be devoted to equities.
10-05-2008 @ 11:53AM
Bill Olmsted said...
Not all financials are in "the toilet." The solid regionals (STI, BBT, etc.) are up over 70% from their July lows.
How long has this been going on?