Brace for the International Slowdown
International sales have been an important part of high tech sales for a long time. In its 2007 annual report, Microsoft noted that roughly 38.7 percent of its revenue came from overseas. HP's non-US net revenue is about twice that of the US. Just under 48 percent of Google's revenue last year was from outside the country. IBM? Not even 40 percent comes from the United States. This is an industry understandably dependent on global business.
But overseas economies might be slowing down, according to BusinessWeek:
Boosted by rising prices for oil and other commodities, inflation is spiking around the world. The problem is worst in "overheated" emerging economies, says Jerry Webman, chief economist at OppenheimerFunds. "Some of them are going to cool off considerably," he warns.Central bankers around the world are throwing cold water on their economies by raising interest rates. And inflation isn't just a concern in emerging economies. The European Central Bank hiked rates on July 3 to fight inflation, despite worries European economies are slowing down, and the U.S. Federal Reserve has signaled it won't be cutting rates anytime soon.Unfortunately, this is not one of those situations that companies can cure by shifting their sales to other geographic regions. What would be left, the Moon? At the moment, the domestic economy is nothing to write home about.
There are times you can anticipate and mitigate broad reaching economic factors. And there are the times you are hosed. In such cases, all you can do is talk to the shareholders, brace yourself, and use any necessary retrenchment wisely. If times of expansion are good to try new ventures and experiment, then when growth slows (or, heaven forbid, contraction starts), companies can calmly examine what they have been doing, anticipate what has the best promise for when things change, and begin to focus.