- Summary: Recent earnings results have confirmed that the tech industry is now mature and slow-growth. HP says it expects fiscal 2006 sales growth of 4-6%, Dell of 4.3% in Q2, . IDC predicts that corporate IT spending will rise by just 5% annually from 2005-2009. Companies are responding with cost-eliminating mergers, stock buybacks, dividend payments and management reshuffles -- all typical of companies in mature, not growth industries. Cisco, however, rejects the contension that its market has matured. Internet companies including eBay, Amazon and Yahoo have also exhibited slowing revenue growth recently. Oracle CEO Larry Ellison's contraversial claim that the tech industry has reached maturity seems to be true. The new growth areas seem to be consumer gadgets including cellphones and iPods.
- Comment on related stocks/ETFs: This is a crucial article for tech stock sentiment, as it appears on page 1 of the WSJ and draws a broad conclusion from earnings season so far. Although there's no data to back this up, WSJ articles like this one seem to be good indicators of short term market movements. Note particularly the contrast to the Barron's main feature this weekend that argued that now was the time to buy large cap stocks, and included in its buy list Cisco (CSCO). Bottom line: this article is a strong negative for tech stocks. The question is how much the sentiments it expresses are already priced-in, and how much further impact the article will have.
Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):