Vadim Chobanu

Credit crunch is what you see every day in adverts, on TV, read online, in newspapers, but for the last few weeks it was stressed a lot in the IT channel, so I would post my thoughts on this. Before I do that, below are a few news headlines that caught my attention, all of them reported in January.

• Intel has reported a 90% drop in profits and is considering a global job cut of 6000 employees.
• Microsoft is considering laying off 5000 employees.
• Empire Direct going into administration.
• Foxconn, the biggest OEM motherboard manufacturer joined the ‘profits warning’ club.
• AMD cuts another 900 of their workforce and reports remuneration pay cuts.
• Nvidia reports dramatic revenue slowdown.
• Denis Publishing closed Computer Buyer.
• Dell to close its Ireland facility making 1900 redundancies.
• Lenovo announced 2500 job cuts.
• IBM is to cut 2,868 jobs, but it may be up to 16000.
• Logitech – 2500 redundancies and profit drops.
• Circuit city in the States to close all its stores.
• Samsung reports loses.

I am sure there are/will be more of the above, but it is worrying to see all that in just a month – it certainly doesn’t smell good and shows just how tough was the last quarter for the IT, which even with the new tech released such as Core i7, x58 chipsets etc, it didn’t help in achieving the targets. I see the new Intel technology revolutionary enough to want to spend money on it, yet everyone is reserved and you can’t see the enthusiasm that could be seen back in 2006 when the Intel Core was released. The current slowdown is caused mostly by the customer spending, or the lack of it if I am to phrase it better. The cut in that spending originates from the general panic infused by the media and the end result is job losses which in turn will cause even less being spent, as to save for the bad times – a chain reaction of inevitable events… hm, dont i sound like half life here? Nope, that was ‘Unforeseen Consequences’. Joking aside though, the reality is not very sweet.

On the other hand, the above news could be actually good news for IT and I will explain why.

I see the PC industry as a relatively honest industry that does innovate a lot and pays adequate remunerations to its executives and everyone involved. To put it in contrast – you don’t see a graduate working in IT to get hundreds of thousands of pounds in bonuses… This is enough in my opinion to argument that the state of the PC industry wasn’t a messy one before this entire global crisis begun, unlike ‘those other industries not to be named’ that created this situation. Yes, quite a lot of companies were and are dependent on credit, but still there are a lot of them that do have history and a strong backing behind them. So what was to be affected, it has been pretty much pruned. I felt the first signs of this downturn in Feb last year and observing it all since then it leaves me but to think the companies caught unprepared or weak are gone, the other players have already understood the new conditions and have begun to readjust as we can see above by cutting down in their production capacity/consolidating its workforce etc. I somehow don’t see the current market turning very much worse – so brace yourselves IT fellas, it can’t be that much longer now before we see it stabilizing and growing again. Maybe we haven’t seen the worst of it, but I still have confidence that soon there will be some light too. It just takes time for everything to readjust to the new state of affairs.