Tech Sector Recovery – or Not

WSJ writes in the wake of results that show that even as HP faces challenges, IBM and Dell are doing well.

Combined with recent cautious comments from Cisco Systems Inc., National Semiconductor Corp. and a host of business-software companies, the announcements highlighted how the tech recovery first glimpsed a year ago may already be faltering.

One troubling sign: rising inventories of semiconductors, which are at the heart of all high-tech devices. Chip makers say they expect inventories to return to normal by September. But Tuesday, Kulicke & Soffa Industries Inc., a maker of semiconductor-packaging equipment that was among the first companies to feel the tech slowdown in 2000, slashed its three-week-old revenue forecast for the quarter ending in September by 19%.

The gloomy outlook has dashed hope among tech executives and investors that the sector will soon return to the supercharged growth of the late 1990s. Pummeled again yesterday, the tech-heavy Nasdaq Composite Index is down 12.5% for the year, and 19% from its peak in late January.

Knowledge@Wharton adds: “Technology buyers hit the brakes toward the end of the second quarter 2004, and it’s worth asking whether spending on software and hardware–not to mention capital spending overall–is being hampered by gun-shy corporate executives.”

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Rajesh Jain

An Entrepreneur based in Mumbai, India.