Tech Execs Plan for Economic Troubles Ahead

By Reuters -  |  Posted 2008-05-23 Email Print this article Print

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Executives say they have to be prepared for any additional economic downturn as pressures on consumer and business spending fluctuate.

NEW YORK (Reuters) - Technology executives around the world are preparing for economic troubles to deepen.

Many hope that their products will prove indispensable for customers and see emerging economies as sure-growth markets.

But low- and middle-income consumers in the United States are struggling, and the relative strength of U.S. corporations may not last, executives said at the Reuters Global Technology, Media and Telecoms Summit in Tokyo, Paris and New York this week.

Virgin Mobile USA Inc (VM.N: Quote, Profile, Research), the prepaid mobile phone service company, expects economic problems to last into the first half of next year for its mostly young customers.

Oil -- and gasoline -- prices keep breaking records, groceries are taking larger chunks of paychecks, and the mortgage crisis is still shuddering through the U.S. economy. That is especially difficult for low- and middle-income groups, said Virgin Mobile USA Chief Executive Dan Schulman.

"People are really and truly trying to make ends meet at the end of the month," he said. "There are debts to be paid."

Far beyond Main Street, the Wall Street banks and other financial titans will need room to raise new funds, since credit is tight, said Rick Simonson, chief financial officer of cell phone maker Nokia Oyj (NOK1V.HE: Quote, Profile, Research).

"It seems since last summer people have been trying to call the bottom for financials. It seems they haven't quite been found yet in terms of the restructuring and the capital raising that has to go on there," he said.

And even those who see a relatively strong corporate America still investing in products to cut risks or improve efficiency are girding for tougher times.

"If you read some of the written stuff, you would've expected that the U.S. basically spent absolutely no money in technology, and that is absolutely not true," said John Chen, chief executive of software maker Sybase Inc (SY.N: Quote, Profile, Research).

But he is not planning on an economic revival in the second half of the year. "I have to prepare. When I run a business I have to assume that it's not going to be pretty," he said.

Fujitsu Ltd (6702.T: Quote, Profile, Research) Senior Executive Vice President Chiaki Ito said he was concerned that the costs of absorbing the crisis in subprime mortgages -- the risky home loans that have gone bust for many U.S. and U.K. lenders -- could divert government funds usually spent on technology.

"I am extremely worried about the indirect effects of the subprime problem," he said. Meanwhile, manufacturing faces risks from rising food and fuel costs. "If costs go up, this could trigger a recession," he added.

The case of nerves has spread to many customers, executives agreed. "Most of the presidents (I've spoken to) have expressed concerns," said Tadahito Yamamoto, president of Fuji Xerox, the office equipment unit of Fujifilm Holdings Corp (4901.T: Quote, Profile, Research).



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