Profit from the tech spending slump

Those technology firms that survived the dotcom bust of the late 1990s have spent much of the time since hoarding money. Now they are one of the few industries with spare cash, and there is talk of a tech-led recovery. Eoin Gleeson investigates, and picks the best bet in the sector.

Shuttered shop windows and long queues at discount stores are the obvious signs of recession. Others are much less visible. Take IT companies have been scaling down the computer hardware they use to support their operations for months. And in the their storerooms, unused PCs are piled high and gathering dust. Indeed, according to a report just released by research group Gartner, this year has seen the worst-ever slump in spending on global IT. Worldwide, hardware spending from printers to PCs and servers is forecast to total $317bn, a 16.5% drop on 2008.

And this is the second severe meltdown for IT in a decade. So the IT firms that survived the late 1990s spent much of the cheap debt-fuelled rebound hoarding cash and generally running their business as if they were operating out of a bunker. Now they are in one of the few industries to boast spare cash. So suddenly there is fresh talk of a technology-led recovery. Last week saw a clutch of robust earnings from IBM, Intel and Google. Meanwhile, the tech-heavy Nasdaq has surged 70% since March.

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Eoin came to MoneyWeek in 2006 having graduated with a MLitt in economics from Trinity College, Dublin. He taught economic history for two years at Trinity, while researching a thesis on how herd behaviour destroys financial markets.