Trippin' with Trip: One Man's View of Carnage to Come

Every month, Trip Chowdhry, the one-man band who covers all things tech under the moniker Global Equities Research, writes a piece he calls Silicon Scoop on current trends and gossip from the Valley. It’s always a good read, but this time around it is especially full of eye-opening predictions, many of them seriously distressing. It reads like Nostradamus has decided to cover the tech business. There’s so much here, it’s hard to know where to start. Anyway, in no particular order, here are some of Trip’s current prognostications:

• Almost every Silicon Valley company is facing deteriorating business conditions and will cut their workforce by 3%-10% by year end.
• Project cancellations are accelerating in almost every vertical, including financial services, retail, transportation and public sector.
• “Many startups are starting to fold.” He contends that “almost every” VC funded open-source company is struggling and will run out of funds within the next 6 months. He also says that “many VC funded Web 2.0 companies are shutting down…the Web 2.0 fad is now coming to an end.” He has a similarly dark view on the prospects for software as a service start-ups.
• He thinks the death of many start-ups will be trouble for Google (GOOG), which he says gets 7% of AdWords related revenue from start-up companies.
• He also sees a coming glut of used hardware arriving on the market early next year, selling at 20%-25% of original prices, and depressing the market for computing and networking gear. He thinks that IBM, Hewlett-Packard (HPQ), Cisco (CSCO) and Juniper(JNPR) in particular are vulnerable to this phenomenon, and could soon find themselves competing with their own used hardware.
• “Every enterprise software company,” including Microsoft (MSFT), Oracle (ORCL), SAP, CA, BMC and Sybase (SY), is negotiating lower prices on maintenance contracts.
• Indian outsourcing companies, including Infosys (INFY), Satyam (SAY) Cognizant (CTSH) and Wipro (WIT) are seeing project pipelines “drying up.” He contends “there is not enough work to keep employees busy.”
• He says Sohu (SOHU), Baidu (BIDU), Netease (NTES) and Sina (SINA)are struggling to maintain top-line growth, as multinationals cut back their online marketing campaigns in China.
• Web browsers are growing in importance; he thinks Oracle (ORCL)and IBM will offer their own browsers within 12 months.
• Motorola (MOT) could get a lifeline in the form of equity investments from Microsoft and possibly Google (GOOG) in return for supporting the Windows Mobile and Android mobile phone platforms.
• First-generation SAAS companies - NetSuite (N),  Kenexa (KNXA), RightNow (RNOW), Salesforce.com (CRM),  Rackspace (RAX), SuccessFactors (SFSF), DemandTec (DMAN)- “continue to struggle and probably will not see any recovery in their business, irrespective of the economy.”
• Salesforce.com’s business “continues to deteriorate, the best is over, the worse is still to come.” He writes that one of his contacts describes the company as “a modern day Visi-Calc.”
• Cisco is feeling pressure from Microsoft and Arista Networks; he expects layoffs at Cisco of 5%-10% by year end.
• VMware (VMW) he says, is seeing business deteriorate. He expects 10% layoffs by year end.
• Apple (AAPL) he says, is going to start selling iPhones via Costco (COST) at $149 starting in January.

A grim world view, to be sure. You can pick nits with some of it - Salesforce.com as VisiCalc seems a little harsh, and I dunno about $149 iPhones from Costco - but directionally, it feels like he’s getting it right. We’ve got some dark months ahead.

Comments

[Urbane Gori...:]

Good stuff.. Thanks... jegan

2008 Nov 11 05:20 PM

[Muzie:]

So, err... Why were all those Great Depressionists 3 months ago?

Funny how all these people show it when their information has no value at that point.

2008 Nov 13 02:31 AM

[Saanvik:]

Anybody that thinks Oracle or IBM, or, honestly, any traditional software company, is going to create their own web browser clearly does not understand the current state of the web.

The counter to that statement is, of course, Goggle Chrome. Google didn't create a browser, though, in an attempt to get market share or more money, they created it to lead the other browser developers towards they type of browsing experience they think will be best for their existing business. In other words, they created it so they could keep their existing market share. It's already working, too. Both Mozilla and Firefox have already integrated functionality from Chrome into their next-generation of software. That helps Google. That's why they built chrome.

Oracle and IBM have no such need and would not benefit at all from creating their own browser.

If this prediction indicates the quality of the rest of the article, well, maybe I'll use this as my counter-indicator, ie, I'll invest in everything he thinks will fail and sell everything he thinks will succeed.

2008 Nov 14 08:55 PM