Beneficiaries are VMWare (VMW), Citrix (CTXS)
6. Investing - Angel investors and venture capital firms will have more opportunities to invest in up-and-coming young companies as these entrepreneurs are turned down for bank financing.
7. Software-as-a-service (SAAS) may become more attractive. With this model, the initial investment to get up and running on a particular software application tends to be much less than it would be if a company were purchasing and installing the full licensed application in their own data center. Look for Salesforce.com (CRM) and Concur (CNQR) to maintain leadership positions through this downturn (if not high stock prices) and perhaps even NetSuite (N) will at least hold its own.
Negative Impacts --
8. Hardware spending delayed - Expect server sales to decrease as businesses put off spending on new equipment and focus on consolidating servers through virtualization. Who gets hurt: Sun (JAVA), HP (HPQ), Dell, maybe IBM. Big telecom suppliers are feeling the pressure in their sector: Nortel (NT), Alcatel-Lucent (ALU) reporting losses though Cisco (CSCO) seems relatively solid at this point. And with the consolidation mentioned above, it is quite possible redundant systems will be decommissioned, leaving surplus hardware and further reducing demand.
9. Consumers cut back - Worried consumers may decide they can do without the latest gadgets. This will hurt the semiconductor stocks as more than half of all semiconductors find their way into consumer electronics. The semiconductor equipment stocks, currently deep in the doldrums, will find their bear streak extended. High-flying gadget stocks like Apple (AAPL) and Blackberry producer Research in Motion (RIMM) may likewise see their growth curtailed. Who really needs a new TV? Makers of LCD panels for TVs are already seeing growth slow - think Corning (GLW).
10. The weak get weaker - Financing is something all companies need whether it is for growth, carrying inventory or making payroll. With lending tight, credit lines being reduced and banks reeling, tech companies won't be the only ones feeling the effects of this credit crunch. But for those tech companies teetering on the edge, this kind of environment could be enough to push them into bankruptcy or into the arms of a suitor. Think of AMD (AMD) and Micron Technology (MU), both reporting big losses, seeing their stocks crushed and facing an uncertain future. Where do they go from here?
In summary, today's environment will provide opportunities for some companies and serious challenges for others. As tech investors, the ten factors listed here should be kept in mind as we tip-toe through this bear market minefield.
