Sharemarket slide means delay in IT decisions, says IDC

Fallout from last week's stock market downturn is likely to delay IT decision making in New Zealand by at least a month while businesses assess the impact, says Graham Penn, manager for analysts International Data (IDC). That's going to take the process into the Christmas season and may mean some decisions now won't be made till February. That aside, Penn says he believes the impact will not be large in New Zealand apart from a soft market for some time.

Fallout from last week’s stock market downturn is likely to delay IT decision making in New Zealand by at least a month while businesses assess the impact, says Graham Penn, manager for analysts International Data (IDC).

That’s going to take the process into the Christmas season and may mean some decisions now won’t be made till February. That aside, Penn says he believes the impact will not be large in New Zealand apart from a soft market for some time.

“Unless things go really bad in the next week or so, I don’t think we’ll have major problems,” he says. “The fundamentals are strong internally, both in New Zealand and Australia.”

Exporters into Asia will be most affected, he believes. “They’ll find their markets are soft for possibly 18 months. To a degree, exporters to Australia will also be affected because Australia is a big exporter of things like minerals to Asia.

“On top of that, there is the expected drought effect of the El Nino weather pattern. That will have an effect on business.

“The greenies will blame it on global warming; business will blame it on an overblown stock market.”

Penn doesn’t believe the SOHO (small office) market will be particularly affected, despite the nervousness of many individuals last week. That’s a view supported by both Compaq and Microsoft.

Compaq marketing manager Tony Lambert says the PC market is not booming so he doesn’t expect the stock market downturn to have too much effect. “The market has just recently had growth in unit terms for the first time in three years.”

He doesn’t expect the Christmas market to be badly affected because there are far fewer private investors in stock markets than there were during the 1987 crash. “People are buying PCs now for many reasons.”

From the corporate perspective, he says confidence in investing in large projects only returned during the past three to four months.

“The corporate market had fallen behind in IT investment from two months before the general election through to around May or June.”

Microsoft marketing manager Steve Jenkins views last week’s stock market downturn as an over-reaction, though he concedes Hong Kong is in trouble and that will affect Australia and New Zealand.

“People got scared and it caused a bit of a panic reaction. But it all happened so quickly, the recovery should be smooth.

“I don’t see it having any significant impact on the New Zealand market.

“The bigger impact will be the falling New Zealand dollar [against the US dollar, the New Zealand dollar last week had fallen to 62.6 cents from an earlier high of around 69 cents]. Obviously, products will be more expensive this Christmas.”

The lower exchange rate is a real plus, according to IBM Australia-New Zealand future strategies manager Mark Fowler.

“We see it [the market downturn] as an expected market correction. Business fundamentals for industry are very strong, particularly with the improvement in the exchange rate. It’s really positive now for export-led industries.

"The real issue is market fundamentals. We hope business doesn’t over-react in terms of confidence.”

Meanwhile, in the midst of last week’s stock market tumble on Wall St, IBM’s shares fell from $US98 to $US90. Big Blue took the opportunity to spend $US3.5 billion to buy back common stock. The result: the shares jumped back to $US99 and CEO Lou Gerstner received a congratulatory phone call from President Clinton, thanking him for supporting the market.

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