Wednesday, February 27, 2008

Corporate retrenching

According to today's Wall Street Journal, durable goods dropped 5.3% in January, which was worse than market's expectations of a 4% drop. Two quick thoughts on this: First, there is a 50/50 chance that the number is wrong. The Commerce Dept originally reported a 5% increase in durable goods orders for December, only to revise it down to a 4.4% increase. Second, no one should be surprised by this. If consumers aren't buying new homes, then they don't need new refrigerators and heat pumps.

I think that these portends a somewhat tight 1Q and 2Q for us in the technology business, especially in professional services. Uncertainty in the general, consumer-oriented market has a halo effect seen in the commercial market. Decision makers in corporate America are consumers, too, and their experiences at the malls, at Wal*Mart and at the Home Depot are going to impact how they make decisions at the office. Plus, B2B businesses who have consumer products companies as clients will feel a pinch as the retailers and manufacturers react to what's happening in the consumer market.

But there are corporate initiatives that senior management wants to get done this year. And as the deadlines for those projects start to close in, corporate demand will pick up. The demand won't be evenly distributed, and I'm not going to fathom a guess as to where it will start. But people with established relationships in the market will be among the first to benefit.

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