TMT credit crunch survivors face new challenge

By Georgina Prodhan and Jim Finkle

FRANKFURT/BOSTON (Reuters) - Technology and media companies have weathered the global credit crunch but a wider U.S. economic slowdown poses a deeper test of their resilience.

After a round of first-quarter earnings reports, investors in companies such as IBM (IBM.N), Intel (INTC.O) and Google (GOOG.O) heaved a sigh of relief, but the sector may have little time to regroup before facing its next major challenge.

The credit crunch has done most damage in the financial sector -- certainly an important customer group for suppliers of hardware, software and communications, but also a sector that cannot afford to fall behind in efficiency-boosting technology.

A slowdown in consumer spending, however, will ripple more broadly through the economy, and leaders of top technology, media and telecoms companies -- including a clutch attending the Reuters global TMT Summit next week -- have yet to convince that they will escape its effects.

Steve Rubinow, CIO at stock markets operator NYSE Euronext (NYX.N), said he was scrutinizing IT spending harder than usual and that smaller vendors would likely suffer most -- an opinion also expressed by several industry observers.

"We're trying to keep a lid on it," he said.

"We're going to get a lot of leverage by reducing the number of vendors we deal with," he added. "We have the Oracles (ORCL.O), the HPs (HPQ.N) and the IBMs (IBM.N) of the world having a significant presence in what we do."

Trip Chowdhry, an analyst with Global Equities Research, says ultimately no tech company will escape unscathed.

"At the end of the day, the customer of every technology company is a consumer and the consumer is getting hurt. It falls back on the whole food chain," he said.

IT SPENDING 'NECESSARY'

Many industry executives, especially those outside the United States, reject this argument.

Those in sectors such as IT services or enterprise software argue their remoteness from the consumer protects them, while the nature of the goods and services they provide could even allow them to benefit from economic adversity.

Masamichi Ogura, chief financial officer of Japan's Fujitsu (6702.T), said last week: "We see no signs that companies are cutting back on IT spending, which they see as necessary to cut costs or meet compliance or risk-management requirements."

Even the more consumer-oriented Nokia (NOK1V.HE), whose CFO Rick Simonson will be a guest at the New York leg of next week's Reuters Summit, has argued that cellphones have joined the ranks of indispensable tools for everyday life.

In general, large providers of corporate software and IT services appear best insulated against an economic downturn and have sounded most confident.