Monday, February 28, 2005

Is the tech industry doing good PR?

Every day I see some great coverage of one tech company or other. In recent times Apple has received much of the positive press following its launch of the Shuffle and the new iMac mini. Indeed Jobs grinning face on the cover of Fortune was a tremendous piece of PR. Yet for all this great PR, confidence in the tech sector, at least from Wall Street, is still lacking. Looking at the sales of the top tech players such as IBM, Microsoft, Intel, HP, Dell, Oracle, Apple and Cisco, you see some impressive improvements in sales and profits overall. Indeed sales growth of over 10% is the norm. Yet if you chart the stock prices of these players for the last year you see IBM, Microsoft and Oracle all down around 5% on the year, HP down 12% on the year; Intel down 20% and Cisco down 25%. Only Dell and Apple have shown improvements. Dell is up 25% and Apple almost 300%. What does this tell us? Does the market think the rest of the tech industry stinks? Not if you read the analyst reports. Most of the major tech stocks are listed as a buy… yet nobody is clearly buying.

The conclusion you have to draw here is that following the bursting of the dotcom bubble, the market doesn’t trust the tech sector in general. The accepted wisdom seems to be that the industry is still overvalued and rather than going through a wholesale correction, the market is letting the tech stocks gradually slide into to the right price range as their earnings improve. Of course the other way of looking at it is to say the tech industry, which is the most competitive industry on the planet, needs to do better PR not for each company but for the industry itself. The tech industry is huge and will get a heck of a lot bigger in the next decade. Growth rates may not be in the 100% range but it will outgrow the GDP of every developed nation of that I’m sure. With such a healthy long term outlook the market ought to be backing the industry. In the coming months the larger tech companies should, in my view, start to consider doing PR not just for themselves but the industry at large. Perhaps then Wall Street will start to pay some positive attention.

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