Thursday, November 20, 2008

Why Tech Stocks are a Good Buy

I've been around. I got slammed in 1987 when the stock market crashed. I remember my parents getting crunched in 1980. There is an important cycle here that has been emerging in my head as a theory but it might be several years before we can find out if there is truth to it. Here is how it goes. It starts with a sequence of events.

1. The economy sours because of "X"
2. The stock market crashes
3. The stronger companies acquire the weaker ones in every vertical.

Now when companies get acquired, their IT systems need to be integrated. If you look at any merger or acquisition of roughly equal sized companies, this takes some time. First consultants have to work with internal IT staff to create a plan, then it is put into action.

So what should the signs be if this is true?

Q: IT people should be as busy as ever.
A: True from my perspective

Q: Consulting companies are still hiring.
A: True from my perspective

Q: Tech conferences will be packed and busier than ever.
A: True from my perspective

The first major sign we will see is going to be results from consulting companies combined with an increased amount of RFPs on the street, probably starting late 2008, Q1 2009. While I don't think hardware will be involved at first, the secondary signs will be an increase in sales from Apple, IBM, Dell et al. In the midterm, we will see system integrators and big projects using lots of ESBs (like Adobe LiveCycle, IBM's offerings, Oracle's suite). Sales will probably weaken a bit for the next month, but strong demand will bounce the tech sector back fast.

That is my prediction. Let's revisit this blog post in about 12 months and see what happened.

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