If Intel's worried about suppliers, so should the rest of IT

Are there any IT companies too big to fail? Don't bet on it--and that's the message coming out of Intel today.

It's reached the point where I don't trust any of the big research houses to get it right when it comes to IT spending.

Last month Forrester reduced its 2009 IT spending forecast while at the same time upping its projections for the remainder of this year. (I should add that Forrester issued its declaration just before the big financial meltdown got going in earnest.)

Meanwhile, tech CEOs gathering this week at the Gartner Symposium ITXpo conclave in Orlando are moping around as they regale each other with ever more depressing tales from the trenches . The Gartner graphic I've embedded here explains why they're uneasy about the near-term:

Gartner

Nobody is yet predicting a collapse of the mainstays of IT a la what's happening to the nation's increasingly beleaguered automakers. But the economic slump is taking a bite out of everyone. After the market closed Tuesday afternoon, Intel reported a 12 percent jump in net income, but warned that the fourth quarter would be "difficult to predict." And in its boilerplate statement, the company included this caution:

The recent financial crisis affecting the banking system and financial markets and the going concern threats to investment banks and other financial institutions have resulted in a tightening in the credit markets, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit and equity markets. There could be a number of follow-on effects from the credit crisis on Intel's business, including insolvency of key suppliers resulting in product delays; inability of customers to obtain credit to finance purchases of our products and/or customer insolvencies; counterparty failures negatively impacting our treasury operations; increased expense or inability to obtain short-term financing of Intel's operations from the issuance of commercial paper; and increased impairments from the inability of investee companies to obtain financing.

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Translation: Intel's worried about the solvency of key suppliers. Speculative, to be sure, but still a big departure from the company's recent talking points.

At this point, everyone's guessing about what's supposed to happen next. How long will it take for the emergency moves by the U.S. Treasury and the G-7 to percolate through the credit markets? What kind of lift might that give to the economy - and indirectly, the IT economy? Will consumers feel confident enough to fill their shopping baskets with consumer electronics gadgets come December?

A lot of questions, few answers. The only safe conclusion is that this is going to take a while to work out. For a good read on what may be in store, check out Larry Dignan's excellent post on ZDNet testing the proposition that software megavendors are too big to stumble.

Click here for ongoing coverage from CNET News, "Tough times for tech."

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About the author

Charles Cooper was an executive editor at CNET News. He has covered technology and business for more than 25 years, working at CBSNews.com, the Associated Press, Computer & Software News, Computer Shopper, PC Week, and ZDNet.

 

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