Companies pull back tech spending
Posted
Oct 15 2008, 03:11 PM
by
Kim Peterson
Rating:
Here's a line that'll strike fear into Silicon Valley's heart: "Do not order any new equipment at this time."
That came from an internal e-mail sent out last week across software company SAP. "No one at this point can say how markets and customers will react in the coming months," says the e-mail, which was obtained by The Wall Street Journal. The executives say they are reviewing all technology spending and have implemented a hiring freeze.
It is exactly this mentality that's causing tech stocks to plummet. Executives have no idea how the economic downturn will hit their companies for the rest of the year. They're moving their employees immediately into make-do-with-less mode, which means no unnecessary travel, no big bonuses, and no money for new computers, BlackBerries or software.
The ripple effect is already apparent at companies like Intel, which said yesterday that "it's hard to know what impact the financial crisis will have on consumer demand." The company was unable to pin down its fourth-quarter revenue forecast to anything more specific than between $10.1 billion and $10.9 billion. That's quite a range.
If a software company like SAP is pulling tech spending, imagine what other companies that aren't so bullish on technology are going through.
SAP shares are down 10% today to $34.50, and I imagine the leaked e-mail has something to do with that drop. It's a behind-the-scenes look at a company that is very worried.
Related reading:
Apple leads big tech downturn
Cisco bouncing back from 'silly' valuation
Is a major down cycle upon us?
