Citigroup Smith Barney(registration required) is painting a less-than-rosy scenario for the tech sector on Wall Street. Don't expect a doomsday scenario, the group's analysts say, but don't go getting your expectations fired up, either:
While a fourth quarter pickup in tech shares seems probable, a strong and sustained rebound is unlikely.
In fact, tech stocks should remain range-bound for much of 2005, even if current assumptions for 3.5 percent -- 4 percent GDP growth prove accurate.
In other words, if tech stocks do show growth it won't be much.
Citigroup Smith Barney notes that there are some issues that are tossing a wet blanket on the tech sector heading into the end of the year, including "lack of killer software applications."
That's been a lament not just on Wall Street. A variety of system builders interviewed over the past two weeks have suggested many of the high-performance battles between chipmakers Intel and Advanced Micro Devices are largely moot " since there's not an abundance of software that actually takes advantage of that extra performance.
Along these lines, David Card of Jupiter Research finds Bill Gates' recent defense of Microsoft's Longhorn development schedule to be laughable:
Don't get me wrong. Microsoft is a great company. (And Windows 95 was no small, elegant system.) But Microsoft -- specifically in Windows and Office -- has been exhibiting serious signs of Innovator's Dilemma for years. I wouldn't be the first analyst to wonder if separating the company's growth businesses from the elephantine monstrosities might have made Mr. Softee even more competitive.
As they move into 2005, investors with tech stocks in their portfolio might start considering that situation -- but without the laughs.