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The pain of downturn

The pain of downturn

Softening ad spending and plummeting business and consumer confidence have dealt new blows to some of the world's biggest tech companies.

Softening advertising spending and plummeting business and consumer confidence have dealt new blows to some of the world's biggest

technology companies, as Google and Intel yesterday further dampened

the IT sector's prospects.

The heavyweights cemented their position as bringers of bad news after

Google said it would dump some advertising programs, and reports

circulated that Intel executives had warned staff the chipmaker could

soon report its first loss in 21 years.

The bad news accompanied a steep drop in quarterly revenue and

earnings at computer equipment maker Logitech and the announcement

that audio technology company Bose would lay off 1000 workers, about

10 per cent of its workforce.

The bleak reports were tempered by better-than-expected fourth-quarter

results and 2009 forecasts from IBM, though the company confirmed

revenue falls in all geographic regions in recent months.

The developments helped propel a 4.8 per cent slide in the tech-heavy

Nasdaq index on Tuesday, adding to the grim tidings that greeted US

President Barack Obama on his inauguration.

Software and hardware maker Sun Microsystems was one of the worst

affected. Its shares dropped 10.3 per cent to close at $US3.56.

Software maker Adobe fell 7.8 per cent, to $US19.42. Microsoft and

Intel suffered more than 5 per cent falls, while Apple, Cisco, Oracle

and Google were all down more than 4 per cent. Google, which laid off

100 workers last week and has announced it will rein in contractor

numbers, said it was dumping a two-year-old program to expand its

reach beyond internet advertising. The program aimed to place print

advertisements in about 800 US newspapers, but the company said it

would stop the service at the end of next month.

"In the last few months, we've been taking a long, hard look at all

the things we are doing to ensure we are investing our resources in

the projects that will have the biggest impact for our users and

partners," Google director of Print Ads Spencer Spinnell said. "While

we hoped that Print Ads would create a new revenue stream for

newspapers and produce more relevant advertising for consumers, the

product has not created the impact that we - or our partners -

wanted."

At the same time, Bloomberg reported that Intel chief executive Paul

Otellini had told staff in an email last week that the company was in

danger of reporting its first loss in 21 years for its fiscal first

quarter.

"We are not going to wake up in six months with everything rosy

again," Mr Otellini wrote in the internal memo, which was obtained by

Bloomberg. He wrote that profitability in the first quarter was "too

close to call". Last week, Intel reported that fourth-quarter net

profit had slumped 90 per cent to $US234 million ($361 million).

Logitech yesterday reported its first sales drop in at least seven

years as third-quarter revenue slipped 16 per cent to $US627.5 million

and net income plunged 70 per cent to $US40.5 million.

IBM reported better-than-expected fourth-quarter results and

stronger-than-predicted guidance for 2009. Its net profit rose 12 per

cent to $US4.43 billion in the fourth quarter, but revenue fell 6.4

per cent to $US27 billion as sales slowed.

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