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Black Monday hits tech stocks, likely to affect US IT workforce
- — 01 October, 2008 08:16
Wall Street's 777-point sell-off on Monday signaled that the US tech sector is unlikely to emerge unscathed by the economic downturn -- with companies being hit in unexpected ways. Just look what happened to Apple, which has been performing strongly in recent quarters.
Apple led the tumble among tech stocks as its share price dropped by nearly 23 percent to US$105.26. Other tech stocks fell as well, although some large enterprises fared better than others. Hewlett-Packard shares were off by 3.62 percent to US$44.55, while IBM's stock lost almost 5 percent to close at US$114.46.
But stock prices aren't the only place IT companies are likely to feel the coming pinch. Analysts warned that technology spending by businesses will be hit, too, although it may take a quarter or two for budgets and priorities to get a makeover. For companies already focusing on cost containment, Monday's stock tumble -- it was the biggest one-day point drop in history -- "is going to triple that," said Rob Enderle, an independent analyst.
IT employment will also see turmoil, particularly in the financial services industry. In announcing Monday that it plans to buy Wachovia for US$2.16 billion, Citigroup said it expects to save US$3 billion of "annualized expense synergies" through consolidations. Look for data centers to be part of any consolidation, said analysts.
Wachovia isn't alone. Last week's demise of Washington Mutual Bank, which was seized by the US government and then acquired by JPMorgan Chase & Co. for US$1.9 billion, will mean changes for its IT workers. Washington Mutual will be moving to Chase's technology platform, with integration expected to be complete by 2010, said Chase.
The economic fallout from these separate but related upheavals will affect all levels of IT, even solo workers like Mark Blackburn, an IT consultant specializing in Microsoft SQL Server. Blackburn, who also has an MBA, spent part of Sunday writing elected officials in Washington, urging them "not to bail out the banks."
The bailout only shifts money from the poor to the rich, leaving taxpayers with the bill, said Blackburn. The "government's solution now is to create future tax obligations."
Blackburn has been working in IT since the 1980s, and said he hasn't changed his $60-per-hour rate since 1998. He said he can't because of competition from foreign workers using H-1B visas and from outsourcing by companies looking for cheaper labor.
Even tech areas that have remained seemingly strong, such as server sales, may yet be affected. Despite recent warning signs about the overall economy -- accentuated by Monday's viscerally shocking market drop -- server sales were up 6.4 percent at the end of the second quarter compared to Q2 in 2007, according to IDC.