Leader: IT industry hit by profits of doom

Over the past few weeks a startling number of companies have made the same announcement: profit warnings. It seems to have become fashionable to say ?sorry, we have over estimated our sales and we are going to make less money this year?.

There have been profit warnings from Datrontech, Adobe, Gateway 2000, Intel, Psion, Micron, Logica and Compuserve, just to mention but a few. Seagate, bless it, has managed to top the lot by announcing two profit warnings as it managed to get its first one wrong.

So what?s wrong with the computer industry? Surely we can?t blame all of this on the general election as was the excuse a couple of months ago. It would appear that the bubble has finally burst. Companies can no longer expect to make record profits simply by fulfilling demand.

Previously, companies have enjoyed this luxury, reporting profit year after year after year. In fact it would appear that demand has dropped off dramatically. There is no longer this huge pent-up demand for the latest technological breakthrough. The usual rush of orders throughout February and March just isn?t there any more. Most consumers have bought their PC and are content to stick with it and corporates have also adopted a wait and see approach, as they don?t want to go through the whole upheaval of upgrading their systems.

According to the various companies which have announced the profit warnings, they are blaming a slow-down in the PC market, which naturally affects software vendors, chip vendors, memory manufacturers and peripheral developers ? to mention but a few.

Now, while the vendors will probably be able to take the hit, the channel won?t. The channel just isn?t financed well enough to do so and is always the one to bear the brunt of falling sales. As one distributor put it: ?There are hundreds of companies out there that are bleeding to death.?

And things don?t look like they are going to get any better, as the industry begins its slide into the slow summer months. While we can all go on holiday and leave the bad stuff behind temporarily, there is no doubt that the bite is going take hold of the market. That means there will be some casualties.

In fact with all this bad news around, it could get to the stage where we may start writing stories about companies that are actually doing well.