Monday, March 06, 2006

IXCO still stuck at 1000

Back in January I wrote about the NASDAQ ticker for tech stocks, IXCO, and my hopes that the tech sector would have a break out year. Two months later..the breakout has yet to happen. The IXCO has retreated to 900s having broken above 1000 for a while. This is despite an economy that's doing well, despite the major companies all reporting solid numbers and even despite RIM settling its lawsuit, thus keeping the Blackberry addicts online.

Now I spent the weekend with a VC whose optimism is addictive and whose ideas for new devices and services seems to filter into every conversation. Indeed, I woke up this morning convinced that the problem the technology industry faces is not a lack of opportunity. If only a fraction of the ideas I heard this weekend come to life the tech industry will be twice the size it is today. No, the problem is that Wall Street has not been convinced that the market really is going to get that much bigger. I firmly believe Wall Street views all the new ideas not as new markets but simply more competition for the existing one. It's no shock therefore that the stock prices of Microsoft, IBM, Oracle, Intel, Cisco and Dell have either stayed flat or have even retreated. Indeed only Apple, Google and HP have showed any signs of life. Google's stock has been very volatile of late, Apple seems to have stalled and HP is really only getting back to where it should have been. Not a great report card.

I don't believe the reason for this is poor performance by the tech vendors. Indeed, out of the companies I've mentioned all have reported revenue and earnings growth in the last twelve months. No, the problem it would seem is, as I've already said, Wall Street doesn't view the tech market as one that is going to grow, or at least not one that is going to grow fast enough. This is of course counter intuitive. We all know that there are still large parts of the world yet to be brought online. We also know that our personal consumption of technology has far from reached its limit.

Solving this will require the tech titans to promote messages of market expansion far more aggressively. It will also require Wall Street to listen which may prove to be the hard part. After all, they heard this message a few years ago only to see it turn out to be an 'overstatement'.

17 comments:

jar said...

I love tech! I wish it would grow and WS trusted it again. But alas I think the IXCO is stuck because so much consolidation happening in the mature tech market (oracle buying everyone) and still volatility because of legal issues (from class actions against Apple, to MS, to Blackberry) so the perception is lack of stability. So they avoid us! Your VC buddy is bleeding edge and even if only half make it to fruition you end up with a ton of startups out of the gate that may or may not be disruptors down the road. Google took years to catch on as a standard. Wish a fire would light up here too :(

Tim Dyson, CEO of Next Fifteen said...

Fair point about consolidation etc but think about the long term growth potential of tech, it truly is amazing even if there are only a handful of big companies serving 90% of the customers. Also take a look at the materials being used by the major tech vendors, few if any talk about the potential market for technology. As I've said before, too many tech firms are obsessed with killing the competition in the media rather than using the media to help them build a bigger market.

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