US credit crunch: Surviving media & technology firms face new challenge

The credit crunch has done the most damage in the financial sector — certainly an important customer group for suppliers of hardware, software and communications, but also a sector that cannot afford to fall behind in efficiency-boosting technology. A slowdown in consumer spending, however, will ripple more broadly through the economy, and leaders of top technology, media and telecoms companies have yet to convince that they will escape its effects.

Steve Rubinow, CIO at stock markets operator NYSE Euronext, said he was scrutinising IT spending harder than usual and that smaller vendors would likely suffer most — an opinion also expressed by several industry observers.

“We’re trying to keep a lid on it,” he said. “We’re going to get a lot of leverage by reducing the number of vendors we deal with,” he added. “We have the Oracles, the HPs and the IBMs of the world having a significant presence in what we do.” Trip Chowdhry, an analyst with Global Equities Research, says ultimately no tech company will escape unscathed.

Many industry executives, especially those outside the United States, reject this argument. Those in sectors such as IT services or enterprise software argue their remoteness from the consumer protects them, while the nature of the goods and services they provide could even allow them to benefit from economic adversity.

Masamichi Ogura, chief financial officer of Japan’s Fujitsu, said last week: “We see no signs that companies are cutting back on IT spending, which they see as necessary to cut costs or meet compliance or risk-management requirements.”

In general, large providers of corporate software and IT services appear best insulated against an economic downturn and have sounded most confident. “The focus is definitely stronger on making the business case for an investment,” said Chris Capossela, senior vice president in Microsoft’s Office division, describing recent meetings with chief information officers. “But I haven’t seen it translate to: ‘Hey,...