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Credit crunch may kill tech deals

September 24th, 2008

BOSTON: Technology companies will be pulling out the stops to sign deals before the September quarter closes next week as customers spooked by the US financial meltdown shy away from spending.

“It doesn’t take much to keep people from signing a piece of paperwork because they are worried, and I would say concerns are incredibly high right now,” said Rob Enderle, principal analyst with Enderle Group, which advises companies on purchasing technology products.

Some sales could get pushed past September 30, while vendors will be pressured to drop prices, a double whammy for tech suppliers.

AMR Research analyst Kevin O’Marah said that as many as one out of 10 technology deals expected to close this quarter could be postponed or killed due to concerns that the financial crisis will exacerbate existing weakness in the economy.

“You’ll definitely see some drop off,” O’Marah said. “Somebody who is thinking about a project that is maybe a borderline decision, this could be enough to cause them to say ‘hold the presses. Let’s just hold that.’”

US investment banks have been selling themselves and seeking new investors, in the wake of mortgage crisis, causing fears to reverberate throughout the US economy that business will slow and credit will dry up.

Technology companies have long had to scramble to close deals in the final days of each quarter, but it is always toughest when the economy is weak. That is because buyers time their purchases on the theory that hardware manufacturers such as EMC Corp, IBM and Hewlett-Packard Co and software makers including Symantec Corp, VMware Inc, McAfee Inc and Citrix Systems Inc price their products like autos.

Car dealers offer the steepest discounts at the end of the quarter so they can meet sales targets. Tech companies generally deny that they discount more heavily at the end of the quarter, but that hasn’t discouraged customers from waiting until the closing days of the quarter to sign deals.
Source:TOI

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