The current economic crisis will hurt the tech sector far more than the dot-com crash did in 2000

Last week Sun Microsystems recently announced that it will layoff 15-18% if its workforce. The move is expected to save the company $700 million to $800 million. Intel announced its sales for the current quarter could drop 19 percent, and the week before, Cisco Systems announced that sales in its current quarter could drop 10 percent. Circuit City has filed for bankruptcy protection. Best Buy and Nokia are struggling too.

"The tech sector finds itself at the mercy of a double-barreled slump in both corporate and consumer spending caused by the housing decline and the economic crisis on Wall Street. Technology companies are also feeling the effect of frozen credit markets as business and government customers struggle to finance computer and software purchases that can run to millions of dollars," writes Ashlee Vance of the New York Times.

Some, like Ashok Kumar, an analyst with Collins Stewart think that this could be worse than when the dot com bubble burst in 2000. “Even during the 2000 bust, the decline was more measured,” he said. “This seems to be going into a free fall

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Texas Instruments & Sun Microsystems have both warned of lower profits

Texas Instruments (TI) and computer hardware maker Sun Microsystems have both warned of lower future profits.

Based on recent weak order trends, TI said it now expected earnings per share of 30-36 cents in the last three months of 2008, below forecasts.

The warning came as the chip firm reported quarterly net income of $563m, down from $776m last year.

Sun Microsystems warned it would report a wider-than-expected loss in the final quarter of the year.

As most industries suffer from the global squeeze on credit and a consumer slowdown, so many technology firms are feeling the effects from a drop in demand.

Streamlining

"Our outlook for the fourth quarter is for revenue to decline substantially based on weak order trends over the past few months," said Rich Templeton, TI chairman, president and chief executive.

As a result, the Dallas-based firm said it had aggressively reduced inventory and would continue to do so until the end of the year.

TI also said it was in talks to sell part of its business of making wireless chips - the division that makes off-the-shelf chips for mobile phone handsets.

It said the move would help it cut costs by more than $200m a year.

The Dallas-based firm said it would focus on investing in custom-design chips, which are used in many smartphones.

Separately, Sun said it expected to report a net loss for the final three months of 2008 of 25-35 cents a share, surprising analysts who had expected the firm to post a net loss of 16 cents a share.

"Sun and its customers are seeing the impact of a slowing economy," said chief executive Jonathan Schwartz in a prepared statement.


















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