OK, this is an over the top, sensationalist title. But today a cash machine at HSBC failed to give me my money. So I headed over to Barclays to withdraw some cash, and that too was down. I popped inside to ask what the heck was going on, and all cash points and instore credit/debit card payment systmes were offline. No one knows why. Luckily they were happy to give me money in the old fashioned way, over the counter, so I could get my lunchtime coffee and chocolate cheesecake (I am on a diet, of sorts).

But, it got me thinking. Viruses today seem to be as much about disrupting services as about stealing information. What if someone made a virus which was soley designed to bring down world payment systems? It would make the credit crunch look like a teddy bear’s picnic. All spending would cease almost immediately. Many companies no longer accept cheques. Cash will be locked up in bank vaults, with queues a mile long of people trying to get at their cash. And when they do, how much will they withdraw? £20? Unlikely. It will be more like £200, to avoid having to queue again. And the banks will not cope with so much cash in circulation.

If an organisation can bring down what is possibly the most secure computer network in the world, they could wreak havoc and mayhem globally.

Even the mighty Google is feeling that economic pinch that well call the Global Recession. The credit crunch is biting deep still and now now Google has decided that it no longer needs many of its sales and marketing staff. I guess, why would they? Much of sales and marketing is about being top of search these days, and Goole *is* search, so they have no problems there! But it goes to show, no-one, or no company, is immune to the economic pressures that we are going through.What is good, is that Google are providing every effort for staff to be redeployed in the organisation. Many companies cannot offer this support for its staff during these problematic economic times.

Google has grown very quickly in a very short period of time. When companies grow that quickly it’s almost impossible to get everything right—and we certainly didn’t. In some areas we’ve created overlapping organizations which not only duplicate effort but also complicate the decision-making process. That makes our teams less effective and efficient than they should be. In addition, we over-invested in some areas in preparation for the growth trends we were experiencing at the time.

So today we have informed Googlers that we plan to reduce the number of roles within our sales and marketing organizations by just under 200 globally. Making changes of this kind is never easy—and we recognize that the recession makes the timing even more difficult for the Googlers concerned. We did look at a number of different options but ultimately concluded that we had to restructure our organizations in order to improve our effectiveness and efficiency as a business. We will give each person time to try and find another position at Google, as well as outplacement support, and provide severance packages for those who leave the company. Finally, I would like to take this opportunity to thank everyone affected for all they have contributed to Google.

Posted by Omid Kordestani, Senior VP, Global Sales and Business Development

Source: Google Blog – Changes to our sales and marketing organizations

Bank of America has slashed Google’s target price by 23% due to a large reduction in online shopping searches. The credit crunch crisis, and resulting recession, has meant that people are restricting their online spending. Brian Pitz, and analyst for Bank of America in New York advised clients that he was down valuing Google due to a reduction in predicted earnings for this quarter and all of next year.

Google’s CEO Eric Schmidt, has made the decision to cut back on hiring, and is no longer recruiting contractors, to help cut staffing costs.

“We see consumers still searching online, but for news and political commentary rather than HDTVs, Blu-Ray players and PCs,” Brian Pitz, Bank of America.

Profits are estimated to be $3.97 a share this quarter, rather than the $4.47 originally forecast. Next year profits have been estimated at $18.21 a share, down from $19.57.

Google’s stock price fell $5.80 (2.1%), to $269.31 at 9:43 a.m. New York time in Nasdaq Stock Market trading. Its share price has crashed by 62% this year.

News source: Bloomberg

At first it seemed that there was going to be a shift from advertising on traditional paper media to more online advertising, leading to a more competitive market, and rising advertising revenues of web publishers. However, according to recent reports on Bloomberg, US online newspapers publishers saw a 3% decline in ad revenues over the last quarter. Paper based advertising has fallen by 19%.

Online advertising had been growing constantly quarter on quarter since 2004, when advertising revenues were first monitored by Arlington. It was thought that the credit crunch and global recession would lead to an increase in online advertising revenues as companies move from print ads to cheaper online ads. But it seems that advertising budgets are being cut back further than expected.

However, there is still no doubt that the printed media is suffering far worse than the online versions, with reports of job cuts from the major news houses and some publishers defaulting on debt payments and reducing circulation of their papers.

One of the first victims to fall was the 100 year old Christian Science Monitor (CSM), which is planning to reduce its daily paper to a Sunday print, and focus on its online version. John Yemma, editor of the CSM said the new model would allow the publication to retain its eight international bureaux and still save money. CSM predicts that this is a “leap that most newspapers will have to make in the next five years”. The CSM previously relied on annual subscriptions to make up a large share of its revenue, now it is turning to online advertising revenues.

The round up of the days main headlines from Bloomberg. The creidt crunch appears to be biting deeper and further as more warnings are seen across the whole spectrum of the global technology sector. Communications, hardware, microchips are all suffering.

BT Will Cut 10,000 Jobs This Year; Lower Second-Quarter Earnings Reported BT Group Plc, the U.K.’s largest phone company, aims to cut about 6 percent of its workforce in the year through March to improve profitability after reporting a slide in second-quarter earnings.

Nortel May Go Bankrupt as Cash Dwindles and Asset Values Decline, RBC Says Nortel Networks Corp., North America’s largest maker of telephone equipment, may go bankrupt by 2011 without a cash injection from the government or financial backers, RBC Capital Markets said.

Sprint Offers Buyouts to Employees as Mobile-Phone Customer Losses Mount Sprint Nextel Corp., reeling from the loss of 1.1 million contract customers last quarter, plans to cut costs by offering buyout packages to the phone company’s workers.

Dell Tumbles After Being Added to Goldman Sachs’s `Conviction Sell’ List Dell Inc., the world’s second-largest personal-computer maker, declined in Nasdaq Stock Market trading after Goldman, Sachs & Co. added the company’s shares to its “conviction sell” list.

Research In Motion’s BlackBerry Storm to Start Selling Nov. 21 at $199.99 Research In Motion Ltd.’s BlackBerry Storm will make its U.S. debut through Verizon Wireless next week for $199.99, taking on Apple Inc.’s best-selling iPhone 3G.

Cable News Takes Cues from Obama Campaign to Keep Viewers After Election Cable news channels, aiming to hold on to the ratings spoils of a lengthy presidential campaign, are taking cues from the victor, President-elect Barack Obama.

For the first time since records began, eCommerce profits are in recession in the UK. Up until October online sales had been in constant growth. Experian division Hitwise said UK internet traffic to online retailers fell 0.5 per cent in October compared with the same month in 2007, suggesting the consumer spending downturn has begun to affect the previously fast-growing online sector.

However, there have been some gains. The budget travel and holiday sector has seen an increase in sales, as has the second hand market. Although eBay has issued warnings for profits and growth, there does appear to be an overall increase in demand for places to advertise and sell used items.

UK Internet visits to budget travel providers, such as EasyJet, Ryanair and Travelodge, increased by 5.3% between September 2007 and September 2008, while the websites of Cruise companies experienced an 8.2% increase in traffic over the same period. Hitwise reports

Searches for second hand items increased 22%this year

UK Internet searches containing the words ‘second hand’ increased by 22% between the weeks ending 13 October 2007 and 11 October 2008. During the 12 weeks ending 11 October 2008, UK Internet users searched for over 22,000 distinct terms containing the phrase ‘second hand’ with searches for ‘second hand cars’ proving to be the most popular.

Top five UK Internet searches containing ‘second hand’:

1. second hand cars
2. second hand books
3. second hand car prices
4. second hand furniture
5. second hand bikes

Another area that has seen an increase in demand during the last year are searches for “sales” and “vouchers”m which indicates that a growing number of people are looking for bargain and discounts online. Some established websites, such as LatestDiscountVouchers.co.uk, have seen rises in traffic from customers as well as more offers being made by retailers that are striving to keep cash flowing during the economic downturn.

Although the online retail market is becoming more competitive, there have been no major upheavals so far. Here are the current top 20 online retailers in the UK:

1. www.ebay.co.uk
2. www.amazon.co.uk
3. www.argos.co.uk
4. www.play.com
5. www.dell.com
6. www.ebay.com
7. www.tesco.com
8. www.marksandspencer.com
9. www.amazon.com
10. www.gumtree.com
11. www.next.co.uk
12. www.euro.dell.com
13. www.ebaymotors.co.uk
14. direct.tesco.com
15. www.hotukdeals.com
16. www.asos.com
17. www.currys.co.uk
18. www.ticketmaster.co.uk
19. www.johnlewis.com
20. www.hmv.com

Gumtree.com is a growing second hand retailer, which is getting close to rivalling the giant eBay. However gumtree’s approach is different, in that it offers free classified adverts. It started as a London free ads website, but has grown to cover 6 countries. Main focus is on flat / room sharing, and provides an invaluable resource to students.

Amazon continues to diversify and innovate to increase traffic to its store. In the last year there has been a huge increase in the use of its aStore technology to increase trade. aStores allow websites to build mini shops on their sites, to advertise Amazon products directly, and range from specific stores such as health and fitness aStores, to general stores such as the GBPShop.co.uk.

Like with the banking sector, it is possible that online retailing will see some major upheavals if the credit crunch deepens and consumers are forced to tighten their belts further.

Europe’s biggest computer chip maker, STMicroelectronics, has forecast a drop in final quarter profits, citing the economic slowdown and reduction of demand for mobile phones. It is expected that sales will be down 8% from the third quarter’s $2.7 billion.

The economic decline and credit crunch is making consumers more cautious, and many are simply not upgrading mobile phones or personal computers. This is reducing demand for microchips asnd semiconductors from mobile and computer manfucturers. Although globally the mobile phone market is still growing, rate of growth is declining.

STMicroelectronics shares hade fallen by 37% this year, compared with a 43% drop in the 18-member The Philadelphia Semiconductor Index. This news follows our reports two weeks ago of job losses in Scotland at Freescale Semiconductor, a US-owned computer chip company. It seems that no company in the communication hardware sector is immune to the economic downturn. Texas Instruments Inc., the second-largest U.S. chipmaker, has also seens its share price drop to it lowest level in years.

Europe’s third biggest player in the semiconductor sector, NXP BV, has predicted that sales would fall by 14% in the final quarter of 2008. NXP has reported a “rapid deterioration of demand” toward the end of the third quarter, particularly among businesses that sell chips to the car industry and consumer-electronics makers.

Nokia Oyj, the world’s biggest maker of mobile phones and STMicroelectronics’s largest customer, reported a 30 percent slide in third-quarter profit this month as prices fell and it lost market share in high-end devices.

In July, Carlos Bozotti cut his forecast for industry growth this year to between 4 percent and 5 percent, from a May prediction of 5 percent to 6 percent. He forecast “a little deceleration” in global chip sales in the second half.

“STMicroelectronics’ end-product exposure means that, despite the company’s recent share gains and positive customer momentum, it is vulnerable to weakening consumer demand across its portfolio” Jonathan Crossfield, Merrill Lynch & Co.

In June, the Semiconductor Industry Association cut its forecast for global semiconductor sales growth this year to 4.3 percent, from 7.7 percent.

“In the fourth quarter, STMicroelectronics expects its gross margin, the percentage of revenue left after subtracting manufacturing costs, to be 38.8 percent, plus or minus 1 percentage point. That forecast is based on an exchange rate of $1.40 to the euro. ” Bloomberg.com

President and CEO Carlo Bozotti commented, “The third quarter reflected continued focus on both our operating and strategic initiatives. From a financial perspective, our third quarter performance demonstrated further progress in strengthening our market position, building on the results of the first half of this year. Before including the additional revenue from the recently created ST-NXP Wireless joint venture, net revenues increased 12.4% year-to-date.

“We are gaining share overall, in particular in our areas of focus: multimedia convergence applications and power solutions. Indeed, we continued to harvest the benefits of our sales expansion initiatives and we increased our sales to new target key accounts by 16.0% on a sequential basis.

“We continue to build scale in the critical area of wireless applications with our joint announcement in August with Ericsson to form a joint venture composed of Ericsson Mobile Platforms and ST-NXP Wireless. We believe this new leader will have the industry’s strongest product offering in semiconductors and platforms for mobile applications and will be well positioned to continue and extend customer relationships with the most innovative players in the wireless industry.” ST.com

Sources and references:
Bloomberg.com
STMicroelectronics
Texas Instructments
Semiconductor Industry Association

An interesting development in the IT industry, as a result of the credit crunch and global economic downturn, is that the leading technology companies are stepping in to the lending market, which many banks and speciality lenders have withdrawn from. The credit crunch is the result of cash declining liquidity, which is caused when the banks stop lending money to each other, and other institutions. The withdrawal of many banks has meant that smaller technology companies are finding it hard to find willing lenders.

Companies such as IBM, Oracle Corp and Cisco Systems Inc. are starting to lend their own cash reserves to customers and are taking on investment risks. Essentially, they are becoming the new lending banks for the IT sector.

However, this market is certainly a risky one, as defaults on technology financings, i.e. loans specifically to allow companies develop and purchase computer hardware, software and other products, have increased dramatically this year. No doubt some of these new tech-banks will fare better than others while trying to win the successful partnerships of the future.

The global recession is undoubtedly going to affect the IT industry, as it is affecting all market sectors. We have already seen warnings from Google, Yahoo and eBay, with reductions in annual growth rates. However, this does not mean that IT opportunities will dry up completely over the forthcoming months and years, as there are still plenty of companies that rely on innovation, and research and development, an will require new blood to bring in new ideas.

One group of IT professionals that may experience an increase in demand are system integrators and consultants, as mergers and acquisitions across the banking sector with result in the need for various separate accounting and trading systems to be synchronised. All companies aim to operate just one accounting system across the board, however vastly different technologies often mean that upgrading the main accounting system may require server upgrades, and reconfiguration of all satellite systems, not to mention business contingency and disaster recover considerations. All of this could mean that there will be a lot of new business in the IT sectors once companies decide how they are goign to restructure and realign their businesses.

Another growth area is likely to be the “pay as you go services”, which include products such as software-as-a-service (SaaS), fully hosted service providers, cloud computing providers and hardware leasing. All of these areas could experience an increase in demand as newly restructured companies may be forced to rent their IT solutions while top management is still agreeing on how to re-engineer the business.

“Most financial institutions will cut back on IT spending. At least half of them will freeze spending or reduce it to the extent that they can for the next six to 12 months.” Rodney Nelsestuen, Tower Group Financial Analysts.

It is predicted that new projects will be hardest hit, as about 22% of IT budgets from financial institutions will be impacted. Most of these budget cuts will result in cancelling new projects, to enable companies to continue to effectively manage and improve current systems.” Ellen Joyner, SAS Institute.

Although there will be some new opportunities in IT, the general trend will be a downturn and reduction in demand for IT professionals. Some sectors of the securities industry have already seen large reductions in hourly rates for contractors, with some companies capping the hourly rate. IT professional could once command extremely high rates, often earning more per year than the directors of some companies, but this is certainly no longer the case in many companies. IT spending in the USA is expected to fall by almost 15%, and 29% of leading companies expect to cut or stop IT spending in the fourth quarter of the 2008.

However, Nelsestuen is relatively optimistic, in that business will not grind to a complete halt, saying that “the business must go on, and companies will need to spend on and support what they need in order to conduct their business.”

Back office data and systems integration will become more important as a result of recent mergers and acquisitions in the financial industry. “The first thing that happens in an M&A is they have to bring together things like general ledgers and then customer service capabilities so they have a single view of the customer, bringing together data from disparate systems.” Chris Boorman, Informatica.

Another area that is likely to see a rise in demand is business analysis. “Activity costing and profitability management solutions will help corporations optimise where they should put their spend and where the major costs are – this will be one of the hotter areas in the short term.” SAS Institute.

Overall, the only certainty is that there is going to be a lot of change within the financial sector. The nationalisation of banks could see a return to less aggressive development of IT infrastructure in the short term – or there could be massive contracts for the right IT companies to win to rebuild systems. As seen previously with NHS systems, government budgets seem almost endless – in 2004 when the NHS started building a new system, costs soared to between £18.6bn and £31bn ($40-$60bn). many people were critical of the costs, claiming that much of the money was wasted, however the IT industry did well, and will do well again.

Google is planning to make less acquisitions and reduce hiring, to help to withstand the global economic downturn. Yesterday Google’s Chief Executive Officer Eric Schmidt announced that the recession means more advertising budgets are being reviewed and often pulled, and Google is having to be sensible with its expansion plans.

Google’s profit growth has slowed as some advertisers, including home and auto lenders, have reduced advertising budgets. However, shrinking ad budgets have damaged newspapers the most, Schmidt said.

“All of us are vulnerable, – tt’s a race between a contraction in advertising, which would affect everybody, and a very positive shift from offline to online.” This would be good news for both Google and all of its Adsense publishers – key word bidding will increase, Adsense income will increase, and Google profits wil increase. However, established eCommerce sites that strongly rely on Adwords may find that they become priced out of some of the more popular keywords in their niche as more larger players start to bid for the number one spot.

Google is used for approximately 66% of all U.S. Internet searches, and up to 80% of UK searches, has spent more than $3.38 billion in the last year on new projects such as the purchase of DoubleClick Inc. which has helped to increase its lead over Yahoo! Inc. and Microsoft Corp. Google’s growing dominance lead to Microsoft making an unsolicited offer for Yahoo in January, a bid that fell though in May. Yahoo may be reconsidering this deal now. Overall the global credit crunch may cost the online-ad business $6.7 billion in lost sales through to 2010, according to Collins Stewart Plc.