Fabric Stock The tech-stock crash at the start of the decade left many investorswith badly burned fingers. After years of soaring valuations andrampant expansion, tech stocks peaked in 2000 and began to fall.Then, to make matters worse, IT budgets were slashed heading intothe 2001 recession. Stock prices  even those of the morerespectable technology firms  collapsed across the sector.

    The next few years saw a recovery, but the bad times are back. Nowthat the global economy is slowing again, Aim-listed IT stocks havebeen hammered  sold off by fund managers who fear IT budgetswill be slashed, just as in 2001. But what the market is ignoringis the extent to which technology has become a part of the fabricof the economy over the last ten years. A recent YouGov survey of15 million broadband users in Britain found that only one in tenpeople would consider giving up their connection to economiseduring the downturn. Nearly a third said they’d give upcigarettes and alcohol before they cancelled their broadbandconnection.

    Private equity and the big technology groups have recognised this and they’ve been quick to take advantage of cheap prices inthe sector to snap up small IT companies with strong balancesheets. There were 440 takeover deals in the sector over the pastyear, according to data provider Capital IQ, accounting for about14% of all merger and acquisition activity. That consolidation willcontinue. Spending on IT should also hold up well. In fact, GoldmanSachs expects that IT spending will rise by 5% this year. Sure,it’s hardly the stuff of the tech boom  but when you considerthat most sectors will see spending cuts over the next few years,any growth is impressive.

    So who is doing all that spending Well, just about anyone whowants to cuts costs or streamline their businesses ahead of therecession, says Paul Hill in his

Precision Guided Investments

 newsletter. A car manufacturer, for example, could outsource thehandling of customer orders to a software firm. In fact, accordingto Edison Investment Research, global revenues from outsourcingsoftware services are set to grow to $11.5bn by 2011, from $5.1bntoday.

    But it’s IT spending in defensive sectors  healthcare andutilities, for example  that will be most insulated from marketturmoil, says Malar Velaigam in Investors Chronicle. According toresearch group Computer Economics, IT budgets for utilities and theenergy sector are expected to grow by 8% this year, with healthcareexpected to see a 3% jump in IT spending. This makes sense. Afterall, a company such as Customvis, which makes the only solid-state laser surgical device for thecorrection of eyesight, is not about to be taken off the operatingtable, recession or no. And in the energy sector, ViaLogy, whose signal-processing technology helps determine the size ofdeposits left behind in abandoned oil wells, isn’t about to loseits market.

(Article continues below)

    Advertisement

http://www.appareltextile-china.com/