IT profit warnings on the up

Ernst & Young figures show profit warnings among publicly-listed UK IT firms are rising fast

The credit crunch is finally taking its toll on publicly-listed UK IT firms, figures from Ernst & Young reveal.

According to the analyst, the number of profit warnings in the Technology Hardware & Equipment FTSE sector rose 60 per cent in the fourth quarter year on year. Eight warnings were issued by seven firms during the period.

The pattern was repeated in the Software & Computer Services segment, where 10 warnings were issued in the final quarter compared with seven in Q3 and nine in Q4 2007.

Karl Havers, partner and head of Ernst & Young’s technology practice, said: “The credit crunch is finally catching up with IT companies. Revenue had remained remarkably resilient for much of the year but business cases for IT spend are now being seriously challenged and all but the must-do spend is likely to be challenged.”

However, Ernst & Young said the situation could have been worse had IT firms not successfully moved to tighten their corporate belts.

James Bennet, a director in Ernst & Young’s technology team, added: “Technology companies had started cutting costs before things got very difficult in September, which probably reflects the fact that less profit warnings have happened in Q4 than we might have expected. We would expect, given the lack of visibility for revenue, and the cutting of projects by large corporates and SMEs alike, to have significant impact and therefore a significant increase in profit warnings in Q1 and Q2.”