Tech is Going to Zero

There is a toweringly bearish piece in the WSJ today about how much the technology industry sucks — or at least how much the technology industry has sucked so far this year, or at least how much tech stocks have sucked, or at least how much tech stocks have sucked for a week.

Why all the qualifiers? Because the piece, while appropriately scathing about tech stocks this year, is also deliriously ex post, with it commenting on what has already happened, not really laying out why such should continue to be the case. Why are things as bad in tech as in, say, the financials? Right now the markets are saying, "It’s a wash: They’re all bad."

That is silly, of course. While tech isn’t entirely walled off from the broader U.S. economy, it also isn’t as levered to credit and the U.S. economy as current market sentiment says it is. Tech is export-centric, it is largely debt-free, it is in a cyclical upturn, etc.

Would I want to be exposed to retail, via Amazon, say? Or, let’s say, to orthodox enterprise software? No, or at least not right now. But by the same token, I do feel good about wireless, storage, security, and, yes, online advertising. So, while technology is not some mystical safe haven from broader economic woes, it’s also not as bad as it’s looked in the last week (a point, admittedly, you might make about more sectors than tech, to some degree, given how undiscerning the market has been of late).

As another data point, and for more on a less bearish tech case, read the interview with Seagate CEO Bill Watkins here.

Related posts:

  1. Revisiting the Tech-Subprime Connection
  2. Tech Stock in the Mirror, What Do I See?
  3. Goldman: Tech Stocks’ Financial Services Exposure
  4. Subprime and the Tech Wreck
  5. Tech: Cheap After the Tech Wreck?

Comments

  1. Tech is cyclical and will get hurt if there is a recession.
    Put aside for a moment this bearish argument (making it therefore more interesting and persuasuive), and consider the overall spending of both consumers and businesses in a slowdown –and its not hard to see how, if we have a recession, tech doesn’t also suffer . . .

  2. Obviously tech would get hurt if we fell into an all out recession – however, certain technologies wouldn’t be as dramatically affected as others. Obviously B2B plays wouldn’t make the most sense – IT managers would cut back on upgrading immediately. However I think online advertising would still be a great place to be. Companies would look to scale back on advertising of course, but they wouldn’t stop completely.
    What they would do is look for the most effective forms of advertising – cost per click ads come to mind. The web provides a very effective medium for serving and monitoring ads and ad effectiveness. So while no sector will be completely spared in a recession, but there are some that will remain fairly well insulated.

  3. sks says:

    As comment above says, advertisers will seek more efficient use of funds. As a consumer, first thing I did when I had to cut back severely on spending was shift almost all my shopping to online. Can check out best prices from many sources in a few minutes. No idea if that will be a general trend, but search site revenue doesn’t depend on what people buy as much as how much they look.

  4. Portnoy Corvosier says:

    Idiotic generalizations. Old fashioned tech doesn’t suck. Old fashioned tech is golden. Problem is, 95% of the zealots running tech companies today never worked at a real tech company in their careers. Most of them probably couldn’t whittle a toothpick, much build a real tech company. They are PR hounds, that’s all.
    Software doesn’t count as real tech, as it is largely smelly vapors hanging like a dark cloud. Tech. They wouldn’t know tech if it hit them in the face. Bah humbug!