Ignore the retail optimism: the channel has it tough until next year.
Yesterday there was the surprise news that retail spending in the UK was up again. The Office for National Statistics reported that retail sales in the UK were up 0.3 percent last month as food sales surged 0.4 percent. All the sane money had been betting on a decline.
This was greeted with a rally on Wall Street and a general feeling that the UK might be coming out of its double dip recession.
The figures were a surprise, because they were before the predicted boost to the UK economy which is alleged to come from the Olympics in the next quarter. This could mean that retail spending could go up for two successive quarters, which many, particularly in government, would see as the UK coming out of recession.
But the retail figures actually confirmed nothing new for IT resellers. In fact all they say is Britons are eating more and they are not interested in buying computers. True, a fat Briton might be a happier and more optimistic, but if he is not investing in IT, then both the industry and consumers are still stuffed.
Simon Furlong, trader at Spreadex warned that speculation that the UK’s double-dip recession has been overstated should be considered with caution.
It is not surprising. Nearly every technology company reporting its quarterly results admitted that they were rubbish and blamed Europe.
Chipmaker AMD says it’s lowering its guidance because of weaker-than-expected sales in China and Europe and lackluster demand overall from consumers. Gartner and IDC have both issued reports showing that PC sales sagged thanks to a shaky economy. While world wide shipments are doing better, that is certainly not the case in the EU.
A real indication that the technology industry was in a double-dip recession came when Intel said it was not optimistic about growth, and revenue for the current quarter is likely to come in below Wall Street forecasts. Again the US chipmaker blamed Europe, although growth in emerging markets such as China and Brazil was also slowing.
IBM sounded a little hopeful when it announced that its results were six percent up. True, Europe was a real killer but Big Blue boosted its earnings by targeting its software and technology services rather than hardware.
Microsoft reported something similar. Windows sales had slumped but sales of business software and servers were strong.
Theoretically this pattern suggests that there is a slump in retail and corporates are not upgrading their hardware. There are lots of resellers who are not targeting these particular areas who should be doing quite well.
Certainly there are a large number of companies who are creating cloud based packages for clients who are doing very well. VMware seems to be using the lull in share prices to buy up other companies, as is EMC. But partners of these companies appear to be the exception.
There is also another factor which is keeping the industry in the doledrums. Before the collapse of the Greek economy, everyone was talking about a consumer orientated IT industry based around mobile toys such as tablets and smartphones. But the recession killed off consumer demand and this means that the mobile revolution has stopped in its tracks.
While the mobile revolution has not killed off PC sales, the industry has been evolving in that direction as if it were true.
This means that companies that pushed into mobile are left with a lot of stock on their hands, and those who didn’t are left with products that no one wants.
So if these retail figures are not the great white hope, and the next ones, based on the Olympic blow out, are artificial, when will things start to get better?
Until this week I would have thought that Windows 8 was going to be the start of things picking up. It should wake up the PC channel and encourage consumers to buy some hardware.
However having talked a few people who have used the new interface there is a real fear that Microsoft is about to ship another Vista. This is not because the software is wrong, but because Microsoft has gone too far in the direction of tablets and following Apple’s “users will do what they are told” mentality.
Redmond’s refusal to let users into a traditional desktop and force them to play in a tablet-like environment will kill off a lot of its trade.
Meanwhile, by issuing a cut-price tablet of its own, it will effectively kill off any efforts in this direction by its retail partners.
Such antics, coming at a time when Microsoft is supposed to be the hope that pulls the industry out of recession, are tantamount to suicide for Microsoft and will promise to seriously damage the industry. If this is the case, it could be that this double-dip recession will keep going for another year or two at least.