When the economy starts showing an ominous downward spiral, companies begin to cut jobs, wages start to decrease, the expressions on most business analysts’ faces seem to oscillate from grave to somber, and then you know that an economic recession has finally hit home. However, when exactly the current spell or financial despair began enveloping corporations and businesses all over the world is still a debatable issue.
A common definition dictates that recession begins when the gross domestic product (GDP) shows a negative growth for two successive quarters. The National Bureau of Economic Research (NBER) estimated that the United States has been in recession since December 2007. Since 20% of the world’s economy is represented by the US, the world could be severely affected by the US economy’s downturn.
Tim Bajarin, a leading analyst in the technology industry, in an article published by FOXNews.com in May 2008, observed that by the middle of 2008, when many industries had been affected by the financial crunch, the information technology (IT) industry seemed to be immune to its effects. The technology sector was not just hopeful of survival during the economic downside, but even predicted that it would still need to use their mobile phones, Personal Digital Assistants (PDAs), laptops and other gadgets. They could cut back on other expenses, but it was assumed that the credit crunch would not affect spending habits on technology products.
In the last quarter of 2008, the IT industry began to take the hit. By the end of September 2008, a 9.1% dive by the National Association of Securities Dealers Automated Quotations (NASDAQ), resulted in big names such as Google, Apple and Amazon losing between 10% to 18% of their worth. Immediately after that Yahoo! Shares hit a five-year low, Dell, a ten-year low, and Sun, a 13-year low.
Some tech firms remained unaffected by the crunch because of the huge amount of cash they had, which prevented heavy borrowing on their part. The gaming industry showed an increase in sales in 2008, compared to the 2007 performance. Nintendo sold a record number of Wii consoles and DS handsets in December 2008. But earlier in 2009, it announced its first drop in profits in over five years. Apart from that, tech giants such as Google, Intel and Microsoft started laying off thousands of workers. The recession was going to get a lot worse before the economic conditions stabilized – and the technology industry was not recession-proof.
In short, the global recession has had its impact but not as severely on the telecom industry as feared – certainly not as severe as to warrant massive layoffs. However, the global recession is not going to dispel anytime soon and how the IT/telecom industry performs in the long run, is something that everyone associated with the industries are cautiously watching.