As we look to usher in a new year, we take a look back at 2007 for a moment in the technology sector. Today we are joined by
Steve Biggs, CFA, who is the senior technology analyst for Zacks Equity Research.
How has the technology sector in 2007 been on an industry-by-industry basis? Can we go down that, real quick?
Sure. You know, overall it was a pretty good year for the tech sector. I think if you break it down by industry, you see a few different dynamics. Of course, the consumer ended up being pretty strong all year, despite a number of concerns with the housing market slowing and problems in that area. The consumer still ended up spending and put in a strong performance.
I think the one notable weakness early in the year was semiconductors, where I cover a couple of companies: SanDisk (SNDK) and NVIDIA (NVDA). They started the year looking pretty weak, but then they looked to be coming off of the bottom towards the springtime, when orders picked up.
And then if you look across into hardware, that seemed to be pretty strong all year. So companies like Dell (DELL) - although they were going through some internal problems - seemed to hang in there relatively well.
Was this a consumer-driven year for tech, would you say?
I don't know if it was consumer-driven. I would say the consumer certainly did its part and hung in there, but I would also say enterprise spending was pretty solid throughout the year.
So when we look forward, then, to 2008, do you expect more growth in enterprise spending, now that we're looking at the consumer with probably a little less money to spend?
Well, you know, we thought that last year, but the consumer stayed relatively solid. I'd be a little cautious on the consumer just because the same trends are in place that have been for most of this year, so at some point they could pull back.
Looking to enterprise, the concern over the past several months - which will hold through 2008, I'm sure - is the financial services sector, which is one of the largest spenders on information technology. IT has kind of a competitive advantage for them as far as security, convenience, as far as access to money - things like that.
So IT is generally one of the first areas to cut back on during troubled times, and with a number of these companies announcing big charges and layoffs, this is an area they could cut back on. It's estimated that about 70% of IT spending is maintenance spending, so that's non-discretionary.
