I was intrigued to read of a new ‘’shape’ to describe the 'recovery' – LUV. L-shaped in markets like the US and UK, U-shaped in markets like Germany and V shaped in the BRICs. Certainly, in all the conversations I have had recently with the CEOs of our major players, none has detected any increases in IT spend – merely the continued desire for ‘More for Less’ -coupled with outsourcing contract churn (good for the winners, bad for the losers but usually meaning a lower amount spent on IT overall)
The ‘problem’ is that the stock markets seem to be reacting to good earnings results (which have been achieved by cost cutting) thinking that they represent IT revenue growth revival. They are then highly selective; pointing at the ‘winners’ (like Apple) as evidence of a tech rebound whilst ignoring the ‘losers’ (like Nokia).
Personally I think the tech stock rebound has been overdone and just must be due a correction. As I have said countless times, tech trends towards the FTSE100 over any medium term. YTD the FTSE100 is up 14% but our FTSE SCS Index is up 55%.
October did see a first, albeit minor, correction towards that trend line with the FTSE100 down 1.74% but the FTSE SCS down 6.4%. The FTSE SCS Index is weighted – the largest companies have the greatest effect. So it was Autonomy (down 17.6% - See For Autonomy growth seems easy; profitability less so), Computacenter (down11.5% - See Computacenter exits distie business), Logica (down 10.9% despite winning a £110m deal at CPS) and Sage (down 8.5%) that really ‘done for it’. Outside the FTSE SCS constituents, Morse continued its power run with another 20% to 38.5p. See Morse’s margins march on. I take my hat off to Mike Phillips for the turnaround that him and his team are achieving at Morse – making himself a well deserved packet in the process!
Outside the UK, results from SAP caused a 8% slump in their share price (See SAP software decline slows). Capgemini (down 11.7%) and Steria (down 16%) joined the UK SITS bears. Adecco slumped 16% as it Goes shopping again. Sopra bucked the trends with an 8% increase – See Sopra flying high with Easyjet. In the US Microsoft put on 7.8% as everyone (except us) interpreted their outlook as pointing to a resurgence in corporate IT spend. See – Microsoft all in the outlook. However NASDAQ overall was down 3.6%.
The ‘problem’ is that the stock markets seem to be reacting to good earnings results (which have been achieved by cost cutting) thinking that they represent IT revenue growth revival. They are then highly selective; pointing at the ‘winners’ (like Apple) as evidence of a tech rebound whilst ignoring the ‘losers’ (like Nokia).
Personally I think the tech stock rebound has been overdone and just must be due a correction. As I have said countless times, tech trends towards the FTSE100 over any medium term. YTD the FTSE100 is up 14% but our FTSE SCS Index is up 55%.
October did see a first, albeit minor, correction towards that trend line with the FTSE100 down 1.74% but the FTSE SCS down 6.4%. The FTSE SCS Index is weighted – the largest companies have the greatest effect. So it was Autonomy (down 17.6% - See For Autonomy growth seems easy; profitability less so), Computacenter (down11.5% - See Computacenter exits distie business), Logica (down 10.9% despite winning a £110m deal at CPS) and Sage (down 8.5%) that really ‘done for it’. Outside the FTSE SCS constituents, Morse continued its power run with another 20% to 38.5p. See Morse’s margins march on. I take my hat off to Mike Phillips for the turnaround that him and his team are achieving at Morse – making himself a well deserved packet in the process!Outside the UK, results from SAP caused a 8% slump in their share price (See SAP software decline slows). Capgemini (down 11.7%) and Steria (down 16%) joined the UK SITS bears. Adecco slumped 16% as it Goes shopping again. Sopra bucked the trends with an 8% increase – See Sopra flying high with Easyjet. In the US Microsoft put on 7.8% as everyone (except us) interpreted their outlook as pointing to a resurgence in corporate IT spend. See – Microsoft all in the outlook. However NASDAQ overall was down 3.6%.
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