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RPT-REUTERS SUMMIT-Tech, media execs brace for economic uncertainty
June 15, 2012 / 9:25 PM / 5 years ago

RPT-REUTERS SUMMIT-Tech, media execs brace for economic uncertainty

(For other news from the Reuters Media and Technology Summit, click here)

* Euro zone crisis, U.S. unemployment has execs cautious

* Olympics, U.S. Presidential election to provide boost to media

By Nicola Leske

NEW YORK, June 15 (Reuters) - A deepening euro zone crisis, tepid U.S. job creation and slowing growth in China have prompted some media and technology companies to sound a stronger note of caution for the rest of the year, executives in those industries said at the Reuters Global Media and Technology Summit this week.

Companies fear the sovereign debt crisis and slowing economies of European nations will drag down the U.S. economy, the executives said. Tensions are running particularly high ahead of Sunday’s pivotal election in Greece -- whose outcome could cause the euro zone economy to deteriorate.

“Clearly we are concerned about the trajectory of where we are heading,” said Tom Georgens, chief executive officer of data storage company NetApp Inc, referring to worries about the debt situation in the south of Europe starting to spread to Germany, Britain and France.

Xerox Corp CEO Ursula Burns said her company had been feeling the effects of the soft European economy since the end of 2011 and that its financial planning for this year factored in the possibility of that continuing.

“I am not expecting it to be a horror story, but I am not expecting it to be great either,” said Burns. Xerox also manages unemployment benefits for some U.S. states and therefore actually sees upside from an economic downturn domestically.

Forrester analyst Andrew Bartels said last week that “the risk of a tech downturn that follows a deeper recession in Europe and slower growth in the U.S. and Asia Pacific have now risen to around 30 percent.”

In the United States, the unemployment rate edged up 0.1 percentage point to 8.2 percent in May.

JPMorgan analysts last week cut their information technology spending growth outlook for 2012 to 2.2 percent from 3.8 percent due to macroeconomic conditions. “This change is a disappointment after we had raised the growth outlook on March 13,” they said.

For tech investors wondering where to put their money, security and software companies are likely to be better bets than IT hardware companies, both Forrester and JP Morgan said.

Although its sales growth has been slowing, software often allows upgrades without expensive hardware purchases and automation, which helps cut down on costs and improve efficiency.

Some categories such as cloud computing, software as a service or corporate security will probably outperform, JPMorgan said, adding that Oracle Corp, CA Inc and Symantec Corp were best positioned.

Forrester’s Bartels called software the one bright spot and said companies such as Oracle, SAP AG and Inc were “looking fairly good.”


The London Olympics and the U.S. presidential election will boost advertising in the second of half of 2012 despite the downturn, the CEOs of advertising agencies WPP and Publicis agreed.

Publicis’ Maurice Levy said the automobile and pharmaceutical companies were “suffering,” and banks were slow to spend. But he added that advertising of consumer goods and technology was holding up well, and battles between the likes of Google Inc, Apple Inc and Samsung are likely to drive up spending from the telecom sector.

The London Olympics this summer have prompted major advertisers like Coca-Cola Co, Procter & Gamble Co and McDonalds Corp to spend heavily to promote their brands to the large worldwide audience the games are expected to attract.

However, Levy and WPP CEO Martin Sorrell presented differing views of 2013.

Sorrell was the more downbeat of the pair, saying 2013 could prove difficult because of an increasingly large U.S. deficit and a lack of major events such as the Olympics.

But Levy was cautiously optimistic. Based on clients’ planning, “I see 2013, for the time being, quite positively,” he said.

For print media, perhaps the only bright spot is the uncertainty that comes with economic troubles, which tends to drive up circulation, particularly for business-oriented publications like the Financial Times.

“The worse the news gets, the more subscriptions we sell,” Managing Director Rob Grimshaw said, adding he would still prefer to be “trading in conditions that were more benign.”

Follow Reuters Summits on Twitter @Reuters_Summits (Additional Reporting By Leila Abboud, Gwenaelle Barzic and Kate Holton in Paris; Paul Sandle in London; and Sinead Carew, Jim Finkle and Jennifer Saba in New York; Editing by Peter Lauria and Lisa Von Ahn)

Our Standards:The Thomson Reuters Trust Principles.
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