The Starting Line: Hooray, it's an official recession
Tech investors should be heartened by the gloomy declaration from an outfit that's notorious for being months late to recognize shifts in the economy.
Why be happy just because a panel of economists--also known as the National Bureau of Economic Research (NBER)--has officially declared a recession dating back to March? Because that means the worst may be over, especially for the tech sector, which showed signs of a recession well before other industries went into a collective tailspin.
When six sages from fancy universities tell you what tech CEOs and their customers have been saying for months, you know things are about to turn up. The group has a tendency to be a little late to declare a recession.
And this time is no different. Any techies who have lost their jobs, watched stock options drown, or have used one of those "perfect storm" analogies, knows we're in a recession. "Duh" is the appropriate reaction to NBER's statement, which surprised absolutely no one.
If the economists had listened to the tech sector, it wouldn't have taken that long to figure out a recession was in the making. In April, just a few days after NBER said the recession began, Cisco Systems CEO John Chambers was already talking about the equivalent of the 100-year flood that whacked the telecommunications sector. "The business environment that our segment of the IT industry is facing has never been more challenging," Chambers said at the time.
In July, Sun Microsystems CEO Scott McNealy joined the chorus of tech chieftains delivering profit warnings and talking about "unprecedented economic challenges." Comments about the weak economy became an earnings conference call staple with Sun and other technology companies, many of which also announced layoffs.
The groundswell of bad news became so overwhelming that Wall Street analysts ran out of cliches to describe it. And that was before the Sept. 11 terrorist attacks, which gave technology companies another reason to be pessimistic about their earnings.