Financial reports confirm fears for IT

Financial reports from vendors including Motorola, Sun Microsystems, SAP and STMicroelectronics, along with economic and IT sector surveys, this week are confirming market watchers' fears that the U.S. is heading into recession, dragging the global tech industry down with it.

The U.S. Commerce Department on Thursday said that GDP (gross domestic output) in the third quarter fell at an annual rate of 0.3 percent. If the current quarter suffers another decline, the U.S. will officially be in recession. But whatever it's called, a slowdown in business and consumer spending is hitting the tech industry.

Worldwide semiconductor sales rose only 1.6 percent in September as growth slowed due to a 38 percent plunge in memory-product sales, according to a report from the Semiconductor Industry Association on Wednesday. Also on Wednesday, STMicroelectronics, the largest European chipmaker, announced a third-quarter loss of US$289 million, compared with a profit of $187 million last year.

For the tech sector, the worst survey this week was IDC's report on Thursday that global mobile-phone shipments in the third quarter were down by 0.4 percent from the second quarter, and up just 3.2 percent from the year earlier. Third-quarter handset shipments often increase by as much as 20 percent year over year, as manufacturers gear up for the holiday season.

"Handset vendors felt the pressures of the dismal economy in the third quarter of 2008, and as a result, shipments and revenues were down almost across the board," said IDC research analyst Ryan Reith in the report.

Against this backdrop, Motorola on Thursday said it skidded to a $397 million quarterly loss. The company said it would cut 3,000 jobs to curb expenses while a restructuring plan and a new platform strategy kick in. On a conference call, co-CEO Sanjay Jha said Motorola will dump the Symbian UIQ OS, develop mobile phones for Google's open-source Android platform, and also embrace Microsoft's Windows Mobile.

But analysts on the call questioned whether Motorola would be able to quickly differentiate its own offering on these platforms, especially since Motorola does not plan to come out with an Android phone until the holiday season next year. Its plan to split off the company's manufacturing arm, warmly embraced by analysts, has been postponed beyond next year. Company shares fell by $0.29 to close the day at $5.17.

Sun on Thursday said it suffered a quarterly loss of $1.68 billion due to a sales decline of 7 percent and a goodwill impairment charge of $1.45 billion.

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