Large technology companies, which until recently remained unscathed from the impact of the ongoing economic crisis, have started feeling the pinch, as a protracted economic slump and the recent financial market turmoil have forced corporates to cut down on their technology spending.
In recent days, many technology companies have announced plans to cut jobs and restructure their operations to reduce costs. Many have issued profit warnings for the current quarter and the full year.
Market research firm Gartner, Inc. (IT) said last month that IT spending would slow in 2009, as global economic problems are impacting IT budgets.
Peter Sondergaard, senior vice president at Gartner and global head of Research, said, "Developed economies, especially the United States and Western Europe, will be the worst affected, but emerging regions will not be immune. Europe will experience negative growth in 2009, the United States and Japan will be flat."
With the Eurozone slipping into recession and the U.S. heading for it, the outlook for technology companies remains gloomy.Nokia Corp. (NOK), the world's biggest maker of mobile phones, on Friday lowered its outlook for industrywide mobile device volumes for the fourth quarter and the full year 2008, citing a sharp pull back in global consumer spending amid the global economic slowdown and unprecedented currency volatility.
The Finland-based company also noted that the mobile device market has been negatively impacted by the more limited availability of credit, which has limited the purchasing ability of some of its trade customers.
In order to address the challenging market environment, Nokia said it is taking additional cots-cutting measures, including curtailing the use of external contractors, consultants and professional services, and further cutting operational expenses in 2009.
Earlier Friday, software and computer server maker Sun Microsystems Inc. (JAVA) said it plans to slash up to 6,000 jobs, or 18% of its global work force, as it scrambles to cut costs to offset a devastating slump in sales of its high-end servers. Sun also said its software chief, Rich Green, has resigned, as the company splits its software division into three new business groups.
The economic downturn seems to be pushing Sun Microsystems Inc., one of the revered names in computing, to the brink of extinction.
Intel Corp. (INTC), the world's biggest chipmaker, on Wednesday lowered its fourth quarter revenue forecast, citing significantly weaker than expected demand in all geographies and market segments.
Intel's announcement came soon after chipmaker National Semiconductor Corp. (NSM) lowered its second quarter revenue forecast and announced plans to cut 330 jobs, and semiconductor equipment maker Applied Materials Inc. (AMAT) reported a 45% drop in fourth quarter profit and said it will cut 1,800 jobs.
Gartner last week reduced its estimate for semiconductor industry growth in 2009 to 1% from nearly 8%, citing the impact of the economic crisis.
Chipmaker Qualcomm Inc. (QCOM) last week reported a 22% drop in fourth quarter profit and forecast first quarter and fiscal year 2009 revenue and earnings below analysts' estimates.
Also last week, Cisco Systems, Inc. (CSCO), the world's largest computer networking gear maker, reported first quarter profit that remained essentially flat with last year even as sales increased 8% in what it called a very a challenging global economy. However, Cisco chief executive John Chambers warned on a conference call that the company's second quarter sales could fall 5% to 10% from a year ago.
Texas Instruments Inc. (TXN), the world's second largest maker of mobile phone chips, last month reported a 27% drop in third quarter profit and forecast fourth quarter revenue and earnings below analysts' estimates. The company also said it was in talks with potential buyers to sell part of its wireless operations.
Even Microsoft Corp. (MSFT) could not buck the impact. The software giant last month reported first quarter profit that rose a modest 2% from last year, as revenue growth slowed amid the challenging economic environment. The company forecast second quarter revenue and earnings below analysts' current consensus estimates and lowered its revenue and earnings forecast for the fiscal year 2009.
Microsoft said its outlook reflects a balance of risks and the likelihood of a continued economic slowdown. For technology companies, the widening financial mess could result in greater difficulties securing financing for acquisitions and tighter lending conditions for basic corporate operational mechanisms such as line of credit. Combined with the deteriorating consumer confidence and reduced technology spending by corporates, the sector is bound to suffer more in the near future.
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May 22, 2026 14:46 ET Minutes of the latest Fed policy session was the highlight of the week along with survey data on the U.S. housing market. In Europe, survey data signaled the trends in the euro area private sector. Further, consumer price inflation data from the U.K. was in focus. In Asia, various economic indicators from China drew attention to the health of the economy.