The American economy may be teetering on the edge of recession, but it appears for now that the high-tech economy is not.
Google Thursday afternoon joined the list of tech bellwethers reporting healthy first-quarter earnings and signaling confidence in the rest of 2008.
Tuesday, Intel was positively bullish in its forecast for the rest of year. Wednesday, IBM was the same. Now you have the most important company in PCs and servers, the most important business tech company, and the most important Internet company all saying the same thing: We're confident in the rest of the year, "regardless of the business environment we find ourselves surrounded by," as Google CEO Eric Schmidt put it in an earnings call.
What's more, Schmidt indicated in a question-and-answer session with analysts that he believes Google is well-positioned even if the souring economy should hit tech, because targeted advertising, Google's specialty, tends to hold up well when other types of advertising head south.
In order to buy the theory that the tech industry is in no way headed for a meltdown, of course, you need to believe that big companies are a good indicator of the industry's health. In the case of these three outfits, it seems like a good bet.
So what's happening? To start, the global economy is not doing as poorly as the American economy, and the companies we're talking about here have a distinctly international flavor. About 51 percent of Google's revenue comes from international sales (and fears that growth in Google's search ad business was slowing down appear to have been greatly exaggerated.). About 75 percent of Intel's sales are outside the U.S. (though that number is a little misleading because many of those sales are to manufacturers who sell PCs and servers back into the U.S.)
At IBM, international sales accounted for $13.9 billion, compared to $9.9 billion in the Americas. Sales in every geographic region were strong for IBM, but the Americas grew the slowest on year-over-year comparisons: 8 percent growth in the Americas, with 16 percent growth from Europe/Middle East/Africa and 14 percent in the Asia-Pacific region.
There are other factors: Google executives believe that even if total ad spending goes down, they'll benefit from a flight to online ads and, in particular, targeted online ads. So even if sectors such as automotive sales and the financial industry pull back their overall spending, Google is still going to get its fair share.
Intel, on the other hand, may be benefiting from a PC replacement cycle. Gartner analysts predict 11 percent growth in PC sales this year, even with shaky consumer confidence. And as for IBM, with international markets growing so quickly (and even tech spending among big American companies still going strong), there's little to worry about...at least for now.
Can other companies--not so multinational, not so dominant in their respective markets--dare to be as confident? Probably not. But did anyone expect the party to go on forever?