The slowdown in the PC market is affecting the chip sector. Advanced Micro Devices said this week that it expects its second-quarter revenue to drop by 11 percent from the first quarter due to slow sales in China and Europe. AMD had said previously that sales for the quarter ending June 30 would increase by 3 percent sequentially, plus or minus 3 percent.
Economic woes for hardware affect all levels of the component supply chain, including companies like Applied Materials, which makes manufacturing systems for the semiconductor and display industries. This week Applied Materials revised its fiscal year 2012 business outlook due to weaker-than-expected, near-term demand in its semiconductor equipment business.
For the fiscal year ending in October, the company expects sales to be below the previous outlook of US$9.1 billion to $9.5 billion. The company will provide a new forecast during its Aug. 15 earnings call.
Meanwhile the software side of tech, while not uniformly sunny for all vendors, offers some bright spots. On Thursday, SAP said that software revenue increased 26 percent in its second quarter to Â¬1.06 billion (US$1.30 billion), at the high end of expectations. The ERP vendor, which will release its full second-quarter results on July 24, said operating profit was up 7 percent to Â¬0.92 billion.
Despite Informatica's earnings warning last week, some software makers are doing well. Oracle and Tibco in the past few weeks reported strong results. Tibco CEO Vivek Ranadivé¬¼a href="http://www.cio.com/article/709659/Wall_Street_Beat_Software_Progress_in_Euro_Zone_Plan_Help_Boost_Tech"> in an interview after the company's results, said that since software is so crucial to business processes now, in some ways it is easier to close big deals -- if a vendor can show a return on investment. The comment matches what some enterprise customers are saying.
"I think you're looking at an environment where when we make big investments, we just have a higher hurdle for the rate of return," said Chris Perretta , CIO of State Street. "I see the current environment as having much more scrutiny into any investment, technology or otherwise."
Taking all facets of IT into account, the tech picture may not be as bad as the most dire forecasts have predicted. Worldwide spending on IT products and services will rise 3 percent in 2012 to US$3.6 trillion, according to a Gartner report early this week. That forecast is up from the 2.5 percent growth forecast by Gartner earlier this year. A lot of the optimism is due to software. Enterprise software spending will be $281 billion in 2012, a 4.3 percent jump, Gartner said.