Market analysts this week drastically cut estimates for global hardware and component revenue as concerns about the U.S.'s handling of the recession took a toll on investor confidence in vendors throughout the whole IT sector.
A series of tech sector-specific warnings Wednesday put pressure on company shares. IDC released a survey estimating that worldwide server revenue saw its biggest plunge in years in the last quarter of 2008. Server revenue declined 14 percent to US$13.5 billion, IDC said.
Meanwhile, Gartner said worldwide semiconductor revenue will drop this year by 24.1 percent, to $194.5 billion. Gartner's prior forecast called for a decline of 16 percent. After the 2001 recession, chip sales dropped 32.5 percent and took about four years to recover, noted Bryan Lewis, research vice president at Gartner.
The report came days after the U.S. unit of Qimonda AG, a bellwether memory chip maker, declared that it is seeking bankruptcy protection. The manufacturer said it did not expect operations to be interrupted because of the filing.
Dell, announcing its fourth-quarter results after the market closed Thursday, confirmed the downward trend in the hardware arena. It said profit plunged 48 percent to $351 million, or $0.18 per share. Excluding certain one-time items, Dell would have earned $0.29 cents per share, better than the $0.26 per-share forecast by analysts polled by Thomson Reuters. However, sales dropped 16 percent to $13.4 billion, missing expectations.
The online advertising sector, up to now one of the few technology-related bright spots, is also in store for a disappointing quarter, IDC said in a report on the sector. Online ad sales could drop by 5 percent in the first quarter this year, the first dip since 2001.
In yet another survey, also released Wednesday, IDC said that U.S. digital-camera sales dropped 12 percent to 15 million units in the fourth quarter. Earlier, the market researcher had forecast a decline of 9 percent.
As debate about the Obama administration's economic stimulus package and proposed U.S. budget roiled the markets, the Nasdaq, home to many bellwether IT stocks, dipped below 1400 several times this week, closing Thursday at 1391, down by 34 points or 2.4 percent. This is close to where the index was in November after the collapse of Wall Street, a level not seen since 2002 in the wake of the dot-com bust.
If history is a guide, it's not just components that might take years to pull out of the current slump. The Nasdaq as a whole never recovered to where it was at the start of the decade.