Sky is Falling?
Tandberg's quarterly financial analyst call was awesome. Lots of growth year over year and faster earnings growth than revenue growth shows an impressive execution model. Not to take way from their terrific result and prospects for 4Q07 and beyond, but Frederik mentioned that financial services vertical was slower than expected which did not bother anybody else, but certainly rang an alarm bell for me. It tells me that fallout from the financial crisis (you know the stories since they're in the business press every day – sub-prime mortgage failures, scandal at CountryWide, private equity financing drying up, etc) has wider effects than just in the nation's largest financial institutions.
Financial services are the largest consumer of IT products and services, building their businesses on information and on speed and efficiencies of transactions. Stress on the income statements due to massive writeoffs of bad transactions and non-performing assets will certainly slow down capital spending and other balance sheet transactions affecting cash. Prudent banking executives will make sure these reigns are pulled in.
Over-reaction and counterproductive 'ripples' are what the Treasury department is trying to minimize (although I'm sure capital spending is not really on the agenda much) with the series of big banker and US Government meetings held on weekends in New York City these past few weeks.
Let's hope that this vertical comes back in the 4Q and that this weakness is not the first few rain drops indicating that the sky is falling.
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