Economy to impact global tech: Wall Street needs to take off rose-colored glasses

After releasing preliminary financials earlier this week that encouraged a Wall Street rally, IBM followed Thursday’s closing bell with final numbers that paint a somewhat less-bullish picture, although Wall Street doesn’t seem to be recognizing that.

Big Blue wisely jumped the gun by announcing preliminary results. Not only did it beat many other players in the tech field to reporting on Q4 and full-year 2007, almost guaranteeing it press, its pleasant outline of the results spurred a stock gain at a time when the Street has become starved for good news that could provide evidence countering the coming recession.

Listen to IBM’s call. You’ll hear many analysts’ questions about the economic situation. And you’ll hear IBM’s responses, in tune with other tech companies like Intel that would encourage us to believe a US-based recession won’t terribly impact them because, while the companies may be based in the US, their businesses are global.

This reoccurring theme on quarterly calls this week is beginning to astound me. If we are truly living and working in a global economy, which we are, how could a recession in a region as influential as the US not have a severely negative impact other regions? The impact of the China SARS epidemic a few years back, while clearly not economics based as the recession will be, was felt across Europe and Asia, and had impact on the US economy with companies restricting travel, conferences, and facing concerns about manufacturing. SARS will prove to be a minor blip on the global scale compare to what the US economy will bring in the coming quarters.

To be sure, IBM is global and a global business strategy is a good one. Such a business model allowed the company to make gains in Q4, largely based on its services divisions and its standing in revenue, two-thirds of which comes from outside the US. Wall Street is eating this up and raised IBM’s stock as much as 4% this morning.

But don’t be fooled here, folks. A US recession will impact the global tech market. True, some companies will be harder hit than others, and, true, IBM is in a very good position because its services/hardware business split would allow it to hold most of its ground given a tech slowdown or a tech spending spree.

No one’s knocking IBM here. Instead, I’m questioning all the suits on the trading floors out there. Open your eyes and accept what’s happening here. Stop raising and dropping stocks in a time when the market should be focused on holding steady. Wall Street’s inability to take off its rose-colored glasses can only make the economic situation worse.

For more, see “IBM stock climbs on upbeat financials” and “Intel stock slammed on Q4 shortfall.”

–Suzanne Deffree, Managing Editor, News