Brian.oco 0 Posting Whiz

Barrons has a great article today on how tech industry chief information officers and chief financial officers can't keep up with the free-fall in consumer spending. That's why we're seeing so many downward adjustments in industry revenue estimates that, right now, seem to be spread way out into 2009. The magazine is forecasting that with a strengthening dollar and the decline in consumer spending, the technology sector is looking at "multiple quarters of negative revenue growth."

That scenario is more bearish than the one presented today by U.S. economists, who are predicting a recession that will last 14 months (with the recession officially starting in April, 2008.) Economists predict slightly negative growth for the first two quarters of 2009, with the economy finally picking back up in July, 2009.

According to Bill Whyman, senior managing director at International Strategy & Investment,
tech revenue is likely to fall for the next two or three quarters. He tells Barrons that the decline in the current quarter could be as much as five percent compared with the same period last year, if the dollar keeps flexing its muscle.

Such estimates are weighing heavily on tech industry big-wigs, who are adjusting their spending budgets accordingly - and on the fly. "It's not as though Silicon Valley CIOs haven't been trying," writes Barrons. "They simply can't revise spending fast enough to keep up with the precipitous decline in the economy. In the latest quarter, an unprecedented 80% of companies lowered their earnings forecasts, so expectations have been tempered, but probably not enough. Projections for tech companies' 2009 sales have been reduced by only about 4.6% from a year ago."

We are indeed witnessing Wall Street history. The research firm Bernstein & Associates surveyed over 100 CIOs, with every last one saying they will not increase their tech spending by even one penny in 2009. In the last eight years, tech spending has averaged a net-plus 3%-5%, while dot.com-happy 1990's saw some years of double-digit spending growth. Bernstein hardware analyst Toni Sacconaghi told Barrons that "intentions to spend on enterprise tech were down across all categories except storage, which has been in consistent demand because of increased regulatory pressure to save, store and back up data. CIOs plan to spend less on personal computers, printers and mainframes next year while virtualization -- software that increases computer efficiency without additional servers -- remains hot. That's good news, Sacconaghi says, for industry leader VMware and storage giant EMC, which owns a controlling stake in VMWare."

For tech investors, both companies may represent an oasis of sorts from the chaos of the tech market. Back to Barrons again, this time for a tech stock outlook from columnist Eric Savetz, who says the ripple effects from the financial blowout are taking a huge toll on Silicon Valley. From September 30 through last Thursday, the Nasdaq has dropped almost 500 points, losing 24% of its value. “What is becoming increasingly clear, however, is that the tectonic shifts that have ripped through the financial sector have led to mammoth collateral damage in Silicon Valley.” Savetz cites chip-maker National Semiconductor’s reduced outlook, and semiconductor manufacturer Applied Materials, as well. "Estimate reductions by analysts in theses tech leaders trickled down to the likes of Dell, Hewlett-Packard, and Apple," Savetz writes. And the The Intel forecast also raised serious questions about recent forecasts from Microsoft, he adds.

One piece of good news comes from cell phone maker Nokia, where Bernstein upgraded Nokia to outperform from underperform on valuation following the company’s profit warning. Merrill also upgraded Nokia shares to buy from neutral to reflect valuation and Nokia’s new product portfolio.

Last note for today: CNBC's Jim Cramer, who has been spotty with his analysis and predictions for the market since the fallout began (he touted Bear Stearns only days before the Wall Street giant imploded) is recommending chip maker Advanced Micro Devices. Cramer told his CNBC audience that he still doesn’t expect a rally in technology stocks any time soon, but after falling 67% so far this year, AMD just won't decline any further.

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