Roman Sandals

July 27, 2008

It’s really different this time…

Filed under: business, technology — Craig Lawton @ 11:28 am

The seems to be a common thread in the media that the IT industry is in for a downturn because the economy in general is struggling. I think it is different this time.

The last time IT struggled was at the end of the dot-com boom. The US dollar was really high, tech companies had massive inventories to clear and Cisco had been the biggest company in the world. The IT world had been set for a golden age which never arrived.

This time, the US dollar is low, tech companies are lean and in good shape having learnt their lessons, and surprise, surprise, the earnings of the big players are impressive and growing.

Intel, VMware, EMC, Apple, Microsoft, Google, all increased profits impressively. Some didn’t increase earnings enough and were “punished”, but this is clearly market sentiment. For example, VMware increased earnings by 40-ish% instead of 50-ish%, and their share price dropped. Strong international revenues especially are boosting results. SUN still struggles, but they were hit hardest by the dot-com era ending, and they still pull $4 billion in revenue each year.

Now big Australian corporate oligopolies, run by cosy, tech-ignorant boomers, have woken to the fact that they have under-invested in IT for the last decade, and have expensive legacy environments which are due for a big clear out. They have to spend money to make their environments lean; to make their businesses internationally competitive. And it’s a good time for CapEX in US dollars. Not only is IT gear very, very cheap compared to 8 years ago, each aussie dollar goes twice as far in US purchases as it once did.

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