BUSINESS
25
Are we facing the end of
business as usual or the start of
a new way of doing business?
As 2008 continues to be overshadowed by the fallout from the US
subprime market, we see banks tightening lending and consumers
tightening their belts. But a market discontinuum is not universally bad
news. Celona Technologies’ Charles Andrews argues that companies
should hold their nerve and resist slashing IT budgets just yet.
T
he simple truth is that markets implode regularly tighten their spending. If you believe everything you read in the
and usually with good reason. While you might papers then it would seem we are staring into the mouth of
think that the $5 trillion of market value lost in recession. But while the outlook is still ‘somewhat uncertain’
the dot com crash of the early part of this decade would have according to economists, we need to get this into context.
taught a few lessons, recent bullish investment has resulted in yet At peak the total number of adjustable rate mortgages in the
another market ‘readjustment’. The current crisis is centred on US were worth around $1 trillion. Only a fraction of these are
the banking and housing markets, caused largely by over inflated subprime and current conservative estimates say the damage is
borrowing and subprime loans, but commentators say the knock likely to total no more than $400 billion. That’s a lot of money;
on effects will be much wider when consumers feel the pinch and but compared to the dot com wipe out, or as a proportion of US
market capitalisation (around $16 trillion), it’s manageable. In
the UK the concern is that growth has been funded by debt,
leaving some sectors highly vulnerable, but the stock market is
resisting a crash, at least for the moment. In May the FTSE
100, for example, bucked the gloomy predictions on the back
of high oil prices (which stimulated a rise in the energy
sector), as well as positive announcements from a range of
companies including BA, BT, Cadbury and SABMiller.
What this means is that if you’re fortunate enough to be
in a sector that’s insulated from the current downturn, you
very much need to keep the wheels on your current initiatives,
since the reasons for these investments haven’t evaporated
overnight. But it also means that in sectors where attracting,
retaining and upselling customers just got more difficult, it’s
September 2008
www.euroasiasemiconductor.com
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