Recession Could Change Game for Technology ETFs | ETF Trends

Some of the company heavyweights within the technology sector are going to have to step things up in a big way if they are going to survive and help boost the sector at large and exchange traded funds (ETFs) that hold them.

Both Sun Microsystems (JAVA) and Motorola (MOT), two one-time huge technology firms that have now become has-beens.  Both companies posted disappointing sales results on Oct. 30, reports The Economist.

Sun’s sales to Wall Street firms, which are among its biggest customers, fell by 20% in the most recent quarter compared with a year earlier, and it reported a loss of $1.68 billion. Sales at Motorola, meanwhile, fell by 15%, with unit sales of mobile phones down by a third, and a loss of $397 million. Yet even before the downturn, both firms were in serious trouble.

Some say the trouble is that both forms focused too much on clever hardware, such as Motorola’s RAZR, or the fancy servers Sun set up during the dot-com boom. But neither focused on updating software services. Sun takes credit for 11.8% of server sales around the nation, while Motorola has 9.5% of the handset market as of the second quarter 2008.

The good news is that neither company needs cash that badly and there are prospects amid the recession of technology. Sun could sell overseas to Japan or Abu Dhabi, and Motorola will split off its mobile phone division creating two listed companies. Their recent troubles suggest a reshaping of the technology landscape following a recession.

  • iShares S&P North American Techology-Multimedia Networking (IGN): down 48.2% year-to-date; Motorola is 5.2%

Technology ETFs

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.