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Oct 9, 2008

The tech downturn: How long and how bad?

The tech downturn: How long and how bad?

Silicon Valley venture capitalist Ron Conway sent a sobering e-mail on Tuesday to the 130 start-up companies he's invested in: now is the time to hunker down.
Ron Conway
Credit: Joi Ito
"You better rely 
on your own 
proactive action."
-Ron Conway

"In 2000 and 2001, the companies that hunkered the fastest were the companies that survived," said Conway in an interview with CNET News. "Get costs under control; make sure you have plenty of runway."

While that admonition from Conway, a noted investor who over the years has put early money into tech giants like Google and up-and-comers like Digg, was timely, it's hard to imagine that any tech executive who's been paying attention to the news needs to be reminded that rough economic conditions are most definitely ahead.

How bad those conditions will be and how long they'll last is anyone's guess. TheCNET Technology Index, which tracks 66 publicly traded tech companies, dropped for the third straight day Wednesday to hit its lowest level in more than three years. Even the healthiest of companies are seeing their stocks being sold en masse. Google, for example, finished trading Wednesday down 2.28 percent to $338.11 per share; that's a new 52-week low and less than half the asking price for a Google share in November 2007

Bad news persists in the overall economy as well, despite continued attempts at government intervention. The Dow, Nasdaq, and S&P 500 indexes all continued to slide Wednesday; the Dow has now dropped 35 percentfrom its high a year ago...

But it's not yet clear what will happen to consumer sales and online advertising. The monthly CNET-Consumer Electronics Association consumer confidence index showed surprising bullishness in late September. Internet Advertising Bureau statistics for the first half of the year showed surprising strength, but the IAB data did little to shed light on what will happen in the fourth quarter...
CEA-CNET Consumer Sentiment Indexes

Current Report

The CEA-CNET Consumer Sentiment Indexes represent more than three years of research into cutting-edge methods for measuring consumer expectations about the future. The indexes measure how consumers perceive the overall health of the economy and the outlook for technology spending. Both indexes focus on consumer perceptions of the future. These forward looking expectations provide market observers valuable information into how consumers will likely behave over the pursuing months. 

As the September report highlights, consumer expectations moved up marketed in September despite the uncertainty presented by Wall Street over the last few weeks. Two consecutive months of declining gasoline prices have likely encouraged optimism among consumers. Spending on technology is flat relative to last month, but remains above the levels during the same period last year.

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