Recession: Doom or opportunity?



It would be unfair to say that signs of recession are surfacing around us now, because they have been there for quite some time. The signs have appeared in our techie world too. If you’re entirely oblivious, then it’s about time you crawled out from that rock you’ve been hiding under. Some industries are just about scratched, while others are reeling under the weight of the slowdown — yet everyone is affected. Take the case of the mobile phone industry, which is expected to weather the economic downturn better than the technology industry in general.

Nokia, the world’s largest phone manufacturer, announced recently that it expects mobile phone sales to be down by at least 10 per cent this year. Therefore, the decision by Nokia to reduce mobile phone production due to falling demand doesn’t come as a surprise. Nokia’s net profit in the last three months of ‘08 was down 69 per cent compared to the previous year. The whole economic domino effect has decreased the disposable income available with consumers to spend on gadgets and technology. In the wake of their pessimistic outlook, Nokia plans to reduce production at its Finland unit. However, in order to cut costs, they’re adopting a rather curious strategy. Nokia said the factory’s 2,500 staff would all be temporarily laid-off for a short period of time on a rotational basis, with 20 to 30 per cent of the staff unemployed at any given point in time.

The World Mobile Congress, too, reflected the sullen mood of the economy. Although manufacturers did show off some dazzling devices, there was certainly a decrease in terms of volume of products. Attendance too was lower, pegged at 49,000, down from 55,000 last year. However, a paradox is emerging in the form of smartphones. Purchases of such handsets (with multimedia functions, web browsers, and high-end cameras) have doubled over the past year according to TNS Research. In fact, Palm is banking on its big come-back with the Pre. The thinly veiled opportunity developing here thanks to smart phones, is revenue from service usage and application downloads. App stores are certainly on the rise with almost all players in this space launching or expanding their Apps stores. Incidentally, the Apple App store has 13 applications that help you save money during the recession. Wonder if there is an app that tells you not to buy the iPhone in the first place? For India mobile games downloads should be an area that has some potential. Speaking of gaming there is a lot of trouble within game studios. Companies seem to want smaller teams now. In other words — layoff all around. Electronic Arts announced recently that they were reducing their workforce by 11 per cent, which translates into 1,100 people. It is closing twelve facilities and narrowing its product portfolio too.

Another one to bite the dust is CeBIT, the annual IT trade show. Slated to take place at Hannover Germany in March, CeBIT 2009, has lost over 25 per cent of its exhibitors compared to CeBIT 2008. This year only 4,300 companies will be part of the expo as compared to 5,845 last year. CeBIT’s sister ‘country’ this year is California and hence the presence of Governor ‘Terminator’ Schwarzenegger at the trade show. However, it looks like the star’s presence is not lure enough for IT companies.

The world’s largest PC manufacturer, HP, is facing its share of economy voes. It’s profit for the recent quarter dropped by 13 per cent, with much of the damage coming from sales for the printer and ink division that contributes more than 40 per cent of HP’s operating profit. Employees were in for a rude shock following this, when they found a long memo from CEO Mark Hurd waiting on their desktops explaining why he was imposing wide-ranging pay cuts in an effort to prevent further job losses. Well, at least pay cuts are better than being axed right? A bit of silver lining is that their services division however showed some promise.

There are ways of looking at the current scenario. The CEO of Intuit, an American tax software company, doesn’t look at it as a short term downturn, but more like a ‘new normal’. On the other hand, there are others who are looking at the economic slowdown as an opportunity. One industry on an upward trend in the midst of the slump and probably a result of it, is the online dating industry.

Dating web sites usually get a spike in users during the buildup to Valentine ’s Day, but this year it seems it was higher compared to the last. A similar kind of surge is seen before Christmas and Thanksgiving. Experts attribute it to the pressure on singles to show up with someone to keep face in front of friends and family. It’s almost like apart from their being embarrassed about their tight purse strings they don’t want to be further humiliated by being single! Well let’s hope the times change for the better lest we see more of these market absurdities.




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