Microsoft, Cisco to lose $4.3 Billion as investment banks cut cost
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Microsoft, Cisco to lose $4.3 Billion as investment banks cut cost

By SiliconIndia   |   Tuesday, 30 September 2008, 03:51 Hrs
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New Delhi: The cut in the IT budgets of the revered investment banks like Lehman Brothers and Merrill Lynch due to their failure may lead industry giants like U.S. based Microsoft and California based Cisco to lose $4.3 billion in orders next year. While Cisco earns about three percent to four percent of annual revenue from the U.S. financial industry, Microsoft accounted for 22 percent last year.

Moreover, the failure will definitely make the banks slash the spending especially in technology, where they had more than 20 percent of contribution. So, Larry Tabb, Founder of Tabb Group in New York says, "Finance-industry technology outlays will sink 20 percent to $17.6 billion next year from an estimated $21.9 billion in 2008." "Additional mergers could affect companies' technology spending," said Suresh Kumar, the Chief Information Officer of Pershing LLC, a subsidiary of the Bank of New York Mellon that oversees $940 billion in assets.

Infact according to Joanne Correria, an analyst at Stamford, Connecticut-based Gartner, "People are going to stop new software deployments. They'll cut in the applications space. In PCs and servers, everyone will stop putting in new hardware. Lehman's bankruptcy and the subsequent takeover of some units by Barclays Plc may reduce the firm's budget for computer spending to $1 billion next year from $2.5 billion as the London-based bank eliminates redundant systems." And Merrill with Charlotte, North Carolina-based Bank of America will bring down their technology-spending from $1.5 billion to $2 billion. Apart from these there is the heavy crash down of Washington Mutual Fund, which was seized by the government and sold to J P Morgan Chase, and it is considered the biggest bank failure in history.

The companies have realized the situation and John Hennessy, President of Stanford University and a Director at Cisco and Google says, "You're absolutely going to see a slowdown in some of that spending." Among other companies who may feel the pinch the most are IBM, who gets as much as 30 percent of sales from financial- services companies and Sun's Unix server computers.

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