No one can say that 2003 has not been kind to the channel. Its profit picture—not to mention its performance on Wall Street—promises to end the year on a high note not seen around these parts since 2000.
With the Nasdaq flirting with the 2000 mark and the Dow marching steadily toward 1400, phrases like "market cap" and "IPO" are back in fashion. The economy's roller-coaster ride may not be over but, as the New Year approaches, it looks like we'll at least ride the high into 2004.
Can the New Year support the momentum? That's the $24,000 question. Times that seem too heady to be true, often are. And some recent Let's look at the recent past. It may tell us something about the future.
One of the best reports of the year came from Oracle this month. Its message was simple, straight-forward, and something to cheer about. Profits were up 15 percent for no other reason than because corporations have begun spending again.
Research in Motion, maker of the BlackBerry wireless e-mail device, also turned in a surprising strong earnings report .
On Christmas Eve, the Associated Press reported domain names were once again netting seven figures and industry watchers at IDC Research are ringing out the old year with an encouraging report: Their data reveals a steady improvement in the PC market through 2002 and 2003—good enough that the research firm is predicting "record" shipment levels in 2004.
Next page: If sales are higher, can greater demand for integration and support services be far behind?
If hardware and software sales are higher, can greater demand for integration and support services be far behind?
Major players believe they're not. General DataComm unveiled a new channel program in the final quarter of the year. IBM announced it expected to expand technical personnel and global software sales by 30 percent. And Siebel, a longtime direct player in the CRM space, announced it would use the channel to chase the mid-market.
A report in the Wall Street Journal this month sent a chill through all that happiness. The Journal reported that IBM plans to move nearly 5000 jobs offshore next year. To date, IBM has not announced details of the plan but it appears more likely to affect its employees than its partners.
Nevertheless, off-shore outsourcing remains a serious concern throughout the tech sector but while Big Blue looks to other shores, there are indications that others are returning jobs to the US, especially in the area of technical support services. Manufacturer MPC Computers this month brought its entire support organization back in-house. Efforts from vendors such as MPC hardly offset the impact of moves by a giant the size of IBM but one would hope it's a trend that continues.
And of course, as we look ahead there's that great unknown—Wall Street. At this writing, things couldn't be headier. The NASDAQ, down too far for too long, was at 1993—up almost 20 points from the previous day.
No doubt about it. The tech sector in general and the channel in particular have had a banner year.
But highs are often followed by lows, particularly when they're the result of less-than-expected losses (but losses, nevertheless) and cost-cutting rather than new sales. Shares of 3Com, for instance, this month shot up more than 4 percent even though the company posted a wide quarterly net loss. The reason? The loss was less than Wall Street expected. We can only wonder how many quarters of "good losses" investors will tolerate before they begin to look for profits.
There's cause for concern over at Cisco, as well. Although the company emphasized it expects to see increased sales in 2004 at its annual analysts' meeting this month, Cisco Chief Financial Office Dennis Powell also told analysts the company hopes to improve profitability by holding the line on operating expenses. Increased sales will most certainly bring good news to the industry but holding the line on internal expenses, although good for Cisco, probably won't result in new opportunities for channel partners. It's the "increased sales" part of the message, we'll be watching.
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