Wednesday, 9 January 2008

AT&T and M&S spark new consumer worries

NASDAQ fell 2.4% yesterday after AT&T's CEO Randall Stephenson told a Citigroup investor conference that "we are experiencing softness on the consumer side of the house from the economy". Readers will know that we have long and often warned that it is the consumer (not enterprise) that has kept tech driving forward. If consumers stop buying gadgets, and the services which they utilise, then tech is going to feel a very cold draft. Indeed a bad case of pneumonia could well be on the cards. In AT&T's case, more home phone lines and broadband connections were being disconnected as the 'credit crunch' bites. "Mobile is the last thing that consumers surrender".

Again, as I said in my 2008 outlook statement a few days ago, I do see tech consumers in the UK 'shopping around' for the very best deals on both broadband and mobile services. This will add to margin pressures as companies compete for the 'switchers' on price. But I also said that I thought the Tier Two players would be hardest hit - with the top dogs (like BT and Vodafone) benefiting. The AT&T news rather indicates that even the big telcos are not immune from consumer woes. Not surprisingly both BT and Vodafone have dropped by c3% in early trading today.

AT&T is the exclusive US carrier for the iPhone. So it was also not surprising to see Apple shares decline 3.4% last night. But that is yet another day in a run of declines for Apple this year - Apple is now down 14% since the start of 2008. (The 'regret' I expressed at selling half my stake when they had doubled to $200 in Nov has now evaporated!)

Today has seen the best UK consumer bellwether - Marks & Spencer - report a pretty tough Christmas; particularly in the non-food/clothing areas where like-for-like sales fell 3%. This has sent M&S shares crashing (down 16% as I write at 9.00am)

I have to be blunt - it doesn't look good. In my New Year outlook, I suggested that tech stocks would fall 15% before staging a mid year recovery. Well, NASDAQ has fallen 8% in just 5 trading days since the New Year. The reporting session hasn't really started yet. If we get away with 'just' a 15% dive, I will now be surprised - and relieved.

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