Monday, 26 November 2007


Carnage? Well that's how George O'Connor (Panmore Gordon) described the last week on the UK markets for tech.

There were loads of other reasons for the turndown but Detica was probably the straw that broke the camel's back with their warning of steep declines in their Financial Services business. The FTSE SCS Index fell 7.4% last week - can't remember such a steep fall in a long while. That makes a 17.5% fall in November to date - and that is really steep! Even NASDAQ and Techmark have 'only' fallen 9% this month so far. Telecomms - both fixed and mobile - also fell; but by a modest 1% (week) 3% (month to date).

In his morning note, George went on to say "The notion that tech is a safe haven has disintegrated despite continued positive news for the companies. Our view remains - tech is not a uniform market. We have concerns about price deflation, Open Source technology and the outlook for discretionary spend in the Financial Services market – not only is Financial Services the largest commercial vertical market with c25% of IT spend, but also the most aggressive in its use of new applications in areas like service orientated architecture (SOA) and software as a service (SaaS). While there are company-specific issues dogging execution at Detica, thoughts of a weakening Financial Services market is likely to keep valuation under the cosh."

In the Enterprise space, I certainly agree with George. But my real concern over tech is the 'consumer' space. That's why Cisco's warning a few weeks back was even more serious. Consumer tech spending has powered the whole tech market ever upwards. If current consumer woes translate into fewer sales of 'gadgets' and related services - then the market place is in for a really bad time indeed.

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