Wall Street Beat: Year Starts on Optimistic Note for IT

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After one of the most tumultuous decades ever for stock exchanges, the new year is starting off on an optimistic note for the tech sector, where many vendors have gained back most of the share value they lost during the Great Recession.

The tech-heavy Nasdaq on Tuesday hit 2308, the highest point it has seen since September 2008, before Wall Street collapsed as banks went out of business or were rescued by the government. The bank bust sent stock markets around the world into a tailspin and drove down shares of IT vendors to levels not seen since the trough of the dot-com crash in 2003.

Since the beginning of last year, however, the Nasdaq Composite has increased by 40 percent in value. Nasdaq computer stocks have jumped 63 percent while the exchange's telecom shares have increased 40 percent. In comparison, the broader New York Stock Exchange Composite index has increased 23 percent and the Dow Jones Industrials has gained 17 percent.

The comparative share values indicate a broad-based faith that technology is helping to lead the world's economy out of the recession. Market research companies such as IDC have said that global IT spending this year will return to the 2008 level of about US$1.5 trillion. Optimism about IT was reinforced last month when bellwether vendors such as Oracle and Research in Motion reported quarterly sales revenue that exceeded year-earlier figures.

During the first trading week of the new decade, several new reports gave additional impetus to the high hopes for tech. On Monday the Semiconductor Industry Association issued a report estimating that global semiconductor sales in November hit $22.6 billion, rising 3.7 percent from October. It was the ninth-straight month of sequential gains, and the first month in 2009 that exceeded the year-earlier figure for chip sales, according to the SIA.

The hardware sector did not do as badly as some had feared in 2009, mainly as a result of consumer interest in netbooks and high-end mobile devices. Over the next three years, smartphone users will exceed a billion, according to a report by Futuresource Consulting.

"Last year, mobile phone ownership exceeded four billion users - which equates to nearly 60 percent of the world's population," wrote David Luu, senior analyst at Futuresource. "And in the face of a handset market which is slowing on the whole, smartphone sales are rising fast, with our year-end forecasts for 2009 showing smartphone sales representing 17 percent of total handset shipments. By 2013, more than one billion people will own a smartphone."

At the CES show in Las Vegas this week, a wide range of vendors have been showing off next-generation mobile devices and chips. Among other announcements, Motorola announced the Backflip, Palm updated the Pre, Microsoft and Dell showed off slate computers, Lenovo launched laptops that double as tablets, and Intel announced next-generation chips for both laptops and desktops.

Meanwhile, comScore reported this week that, for the full U.S. holiday online shopping season, $29.1 billion was spent online, a 4 percent increase compared to the same period last year

A spate of mergers and acquisitions is also helping give the sense that the IT sector remains dynamic, as vendors look to quickly ramp up on cutting-edge technology. Among the acquisitions announced this week:

--Oracle said Monday that it bought Silver Creek Systems, which offers software that helps companies simplify and standardize product descriptions.

--EMC said Monday that it would buy Archer Technologies, which develops governance, risk and compliance software.

--BMC said Thursday that it acquired Phurnace Software, a maker of products designed to help deploy Java applications.

--Apple confirmed Tuesday that it acquired Quattro Wireless, which makes an ad-serving, tracking and analytics platform that observers said could help the iPhone maker generate more revenue from online sales.

Terms for these deals were not disclosed, though the Wall Street Journal reported the Apple acquisition was worth $275 million.

On Thursday, Google and video-compression technology maker On2 Technologies said that the search giant is sweetening its bid for the company, adding $0.15 per share to its August offer. Google offered 0.0010 of a share of Google Class A Common Stock for each share of On2 common stock in August. At the time the offer was made, it was worth about $106 million. On2 shareholders apparently declined the deal, but the new offer amounts to an extra $26 million in cash, in consideration for the rise in Google shares since August. Google shares hit a 52-week high Tuesday, closing at $623.99.

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