Tech bust fears persist

Tech analysts are warning that the industry might be slipping into its worst downturn since the dotcom bust in 2001.

"Things are tough out there," says equity analyst Brent Bracelin with Pacific Crest Securities.

While Hewlett-Packard announced a big quarter increase this week, leading to a big tech rally, growth among other tech companies is muted. Cisco, Intel and Sun are among big tech suppliers that have trimmed revenue and earnings projections for 2009 in anticipation of major cuts on corporate spending on tech infrastructure. Analysts say there will be a slowdown, but not nearly as bad as 2001, according to several major tech research firms. Gartner and IDC recently projected slightly less than 3% growth rate in global tech spending for 2009, down from earlier estimates of about 6% growth.

But ISI is more optimistic. "My view is that tech cannot fight the downward tug of economic gravity," says Bill Whyman, head of ISI's tech strategy research group. He predicts 2009 growth in global tech spending in the "mid-single digit negative."

"Computer hardware spending falls the most but is the first to bounce back," says Whyman. "Software spending is the most stable, and communication equipment spending often lags the recovery."

There is one glimmer in this dark scenario. The U.S. video game market grew 18 percent in October, compared to the year earlier during that month, and appears to be on track for a record. Video games "are like comfort food," says Rebecca Wettemann, vice president of research at Nucleus Research. "People getting laid off need something to do."

For more on the tech fears:
 - check out this USAToday.com article [1]

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Economic downturn news from FierceCIO [2]
Grim outlook for IT spending [3]