This is a guest post from Larry Dignan. You can read the original article on Larry’s blog Between the Lines on TechRepublic’s sister site ZDNet.
Trying to figure out where the information technology economy is going? Your guess is as good as mine. Or Steve Ballmer’s. Or Steve Job’s. Or Paul Otellini’s. Or EMC’s Joe Tucci’s. Or Jeff Bezos’. The one trend that’s emerging from a bevy of financial reports is that companies have no visibility into demand.
And on a Friday morning when you learn new terms like “limit down,” which means that the stock futures can’t fall any lower before the market opens, that lack of visibility is critical. How bad is it?
Intel plans to give an update in mid-quarter update because the fourth quarter is so murky. Microsoft says we’ll have either a mild recession or steep one. Amazon provides a range of possibilities that make you wonder why the company bothered to give guidance at all. And even Apple is having trouble getting a read on the economy.
Simply put, no one knows whether consumers will show up, CIOs will freeze and whether information technology spending is totally expendable. For the IT worker that uncertainty has been seen before–2001 to 2003–but this time may indeed be different. The globe is deleveraging and the ramifications are huge. We’re all flying blind.
Also see: State of the enterprise tech economy
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Mark Cuban: The Cure To Our Economic Problems
Here’s a look at the Powershares QQQ Trust, a proxy for the tech-heavy Nasdaq, year to date through premarket trading:
Let’s sample how blind we really are about the tech economy:
We’ve widened our forecast range in the second half of our fiscal year as variability in the market demand clearly becomes more pronounced. The forecast also reflects continuation of the trends we saw in the first quarter, and assumes the following. Traditional mature market PC units will grow in the low single-digits, but with high potential variability. Emerging markets units will continue to grow mid to high teens.
We’re not economic forecasters, and there is a high degree of uncertainty in outlook based on the state of the economy. As a result we’ve adjusted our guidance approach as follows. At the top end we’re assuming a mild recession, and a relatively modest growth rate for all IT-based products. While at the bottom end we’re assuming a deeper recession in the economy an end-season lower growth for IT.
It’s clear that the financial crisis may impact our business but the extent of that is difficult to quantify. As a result, we’ve made two changes for this quarter — one, our outlook has a wider range than normal, reflecting our view of the boundaries of the risks, and two, we’ve decided to provide a formal mid-quarter update scheduled for December 4th to allow us to give you additional information about the state of Q4 business trends as the business and financial conditions unfold.
In the last three weeks of September we did see some slowdown in the SMB and commercial markets which was mostly caused by an air of caution on the part of our customers. This was also coupled with a tightening of the credit markets. We saw a few large IT products get postponed by our large enterprise customers and we did feel the impact as several large financial institutions paused some of their IT spending as they are going through a wave of consolidation. We are seeing some signs of a slowdown in IT spending in many parts of the world. I believe the slowdown will continue into 2009.
So now let’s turn to the economy, to the broader market conditions resulting from the global economic slowdown and credit crisis. First, let me say that we are not economists. Your next-door neighbor can likely predict what is going to happen as accurately as we can.
Incorporated into our guidance are the order trends that we have seen to date and what we believe today to be appropriately conservative assumptions. We experienced slower rates of growth towards the end of the third quarter, coinciding with disruptions in the global financial markets. While guidance takes into account these growth rates, our results are inherently unpredictable.
And on and on. In fact, any company that tells you they can predict demand is lying. That fact is why the tech ecosystem–buyers, large vendors, start-ups and venture backed outfits going through their first downturn–is frozen.
It would be swell to have five handy tips on how to navigate this crisis, but it’s not that easy. Frankly, those little tips have become too trite. The tech sector, which is in a much better position than the last downturn, is venturing into the unknown.