Wednesday, September 17, 2008

Financial Failures Freeze Mass. High Tech

Yeah, this whole house of cards that this state relies on is going to be our future saviors.

"Mass. high-tech start-ups brace for spending freeze after Wall St. woes" by Robert Weisman, Globe Staff | September 17, 2008

The cold wind blowing from Wall Street is sending shivers through the state's high-tech industry, as start-up companies and their venture backers brace for a slowdown in spending on technology and a prolonged freeze on initial public offerings.

Amid fears of deepening turmoil in the financial markets, the businesses that buy everything from computer software to networking gear - staples of the Massachusetts technology sector - are expected to reduce their spending. Leading the pullback will be investment firms, projected to slash technology outlays by 7 to 10 percent in the coming year.

"Financial services firms are going to be cutting back their technology spending the hardest, but we're looking at a global economic downturn across many sectors," said Rob Hegarty, managing director for the securities and investments practice at TowerGroup, a Needham research firm.

Some vendors have found the spending pullback already has begun, especially at finance companies tied to Wall Street. Meanwhile, the mounting uncertainty in financial markets threatens to extend the IPO drought that's prevented start-ups from going public and venture capital firms from cashing out on their investments this year. IPOs are considered a key measure of health for technology entrepreneurs.

Entrepreneurs said the flagging economy could force them to husband cash, stockpile more capital, and hire more carefully as they look to a longer time horizon before going public or being acquired. But the greatest employment impact may be felt at more established companies, as they adjust to declines in orders from businesses and consumers. Computer giant Hewlett-Packard Development Co. said on Monday it plans to eliminate 26,400 jobs worldwide following its acquisition of Electronic Data Systems Corp. HP, which employs thousands of workers at former Digital Equipment Corp. sites in Massachusetts, wouldn't break down where it will cut jobs.

What will be harder for the majority of technology companies in Massachusetts, which sell into business rather than consumer markets, will be persuading customers to buy their products in coming months, as the Wall Street crisis spreads into the broader economy.

Translation: This ain't over, not by a LONG SHOT!

Think 1929, America!!!