As I visit some old friends from my JBoss days a lot of them ask me what the whole crash means for them.
Here are some back of the envelope factors.
Negative. IT is a servant of the financial industry. Conventional wisdom says that there is no way but down. Consider SUN valued at a paltry 3.8B with 3B of cash. It is a poster child. Private equity and management should take out this company. Who's got $800M? anyone? I should leverage right now with a few private equity friends and go buy it out...
Very Negative. Widely known dirty secret of the software industry is that earnings were 30% investment revenues. These are now strongly negative but probably wont be realized. Nevertheless that is a drop in 30% in earnings, possibly more as the markets tank. If you realize a -20 when you were clocking +10 then the hit on earnings is -60%. Ouch... RHT was trading at 24 this summer it is now at 13... yep, numbers work out.
Very positive. With all the banking consolidation going on, plus the amount of regulation that will surely rain on this activity, my software integrator friends will be busy for many, many, many years to come.
When the first financial world war (FFWW) is over and the bombers have stopped levering the field we will need to rebuild. The software skills, the integration skills will come in handy. There is a bright future for my friends. And I feel good about that.
From an investor standpoint. Adjust Cash flows on the way down. Look for maintenance revenue. In a crash like this people will not pay new licenses but will certainly continue paying maintenance. Buy Oracle, Short MSFT. IBM should fare well in the long run (services).