According to the latest retail sales figures, Santa Claus must have had it pretty easy last month.
In fact, holiday sales were so awful this year the North Pole will probably be looking for a bailout of its own pretty soon. (Rumors have it that Santa was heavily leveraged.)
The joy of giving aside, the Commerce Department reported yesterday retail sales fell 2.7 percent in December, more than double the 1.2 percent decline analysts were looking for. That marked a record sixth straight month of declines and was the just latest sign that consumers have finally decided to close the old wallet.
After all, if Christmas can’t get people to spend money what exactly will?
However, it was also an ominous sign for the tech stocks, which are largely dependent on people buying all things electronic. Gadgets, TVs, cameras, you name it and the tech industry depends on the sale of it.
Unfortunately for the sector, their goods were treated largely like those on the island of misfit toys—left on shelves to wait for next year.
In fact, according to MasterCard, in the seven weeks prior to Christmas Day, sales of electronics and appliances in the United States fell by 26 percent this holiday season from the year before. Bah humbug.
But although the tech sector fell on hard times again this year, the show itself goes on. That was the story at least from the Consumer Electronics Show, where the tech sector trends for 2009 and beyond were unveiled last week.
Bullish on the Tech Sector
However, despite the doom and gloom of another lost year, some industry insiders were downright bullish on tech.
One of them was Microsoft CEO Steve Ballmer, who insisted the best was yet to come.
"As this recession ripples across the globe," Ballmer announced, "it feels like we’ve entered a period of reduced expectations, a time when we may be tempted to temper our optimism and scale back our ambition. But no matter what happens with the economy, or how long this recession lasts, I believe our digital lives will only continue to get richer. There really is no turning back from the connected world and the pace of technological advance bringing people closer together."
Of course, part of Ballmer’s bullish exuberance can be tied to Moore’s law itself.
That’s because, to a large extent, real progress on the technological side is dependent upon improvements in chips themselves. That tends to give technology trends a rhythm of their own since, according to Moore’s law, hardware basically improves 100X every ten years, while software increases by a factor of ten.
And since Moore’s law just keeps on delivering, Ballmer’s belief in a better tomorrow is completely understandable. He’s not crazy, after all, even if he was willing to pay through the nose for Yahoo, earlier. He just knows the technology of the future really will dwarf that of the past—eventually.
In the meantime, though, the top tech sector trend of 2009 may just be that it’s stuck in neutral.
In fact, during last week’s show, the Consumer Electronics Association forecast that U.S. electronics sales would fall by 0.1% to $171 billion this year from $172 billion in 2008. On top of that, market researcher DisplaySearch predicted a reversal from the recent gains of flat-panel TVs —the global tech industry’s biggest single source of revenues. According to the group flat panel sales could slide 1% to 205.3 million units this year.
The trickle down from those declines are business models looking to cut costs. Among them are SanDisk, which recently halted production for two weeks, following similar moves by Sony.
Top Tech Sector Trends of 2009
Even still, the Consumer Electronics Show did give investors a whiff of the future, particularly with the buzz surrounding netbooks. A tweener product somewhere between a smartphone and laptop, netbooks are actually one of the areas where the industry expects growth in 2009.
In fact, according to Gartner, the netbook market is expected to grow by 80 percent in 2009, and by 2012, netbook sales will top 50 million.
And since they are relatively cheap at around $400 apiece, they could easily become the next "got to have" gadget, much like the iPhone. As a result, there were no shortages of manufacturers pushing them at the show. All the big players, including Dell, Hewlett-Packard, Sony, and Asutek showed off new models.
Another dominant tech sector trend is the move towards speech recognition, which IBM said in November would be one of five innovations that will change our lives over the next five years. "You will talk to the web," IBM says, "and the Web will talk back."
According to the tech heavyweight:
" ‘Going’ to the web will change dramatically in the next five years. In the future, you will be able to surf the Internet, hands-free, by using your voice – therefore eliminating the need for visuals or keypads. New technology will change how people create, build and interact with information and e-commerce websites – using speech instead of text."
Today, some two months later, IBM actually followed up that prediction, announcing an agreement with Nuance Communications Inc. (NUAN) to jointly "enhance and expand innovative speech solutions" worldwide. Nuance Communications is the leading player in the niche.
"IBM and Nuance share a vision to proliferate advanced speech capabilities across a broad range of devices and environments," said Dr. John E. Kelly III, IBM senior vice president and director of IBM Research. "We recognize that Nuance is a leader in the speech marketplace and we believe this technology agreement will accelerate the delivery of speech innovations to the world’s consumers."
So while the Christmas season turned out to be something of a bust, and the NASDAQ has tumbled, the larger truth is the beat in tech goes on. With the help of Moore’s Law, the industry simply pushes on—like it always has—to a new a future.
Recession, depression, or somewhere in between, tech entrepreneurs are still out there chasing their down dreams.
And for the investors that follow them comes the possibility of giant-sized profits.
Your bargain-hunting analyst,
The Wealth Advisory
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