News Article

Sector Analysis

Profit warnings in the Software and Computer Services sector fall despite tough economic conditions

By CreditMan Wednesday, October 15, 2008

Research released by Ernst & Young has revealed that the number of profit warnings from listed companies in the Software & Computer Services sector has fallen despite the worsening economic climate.

In Q3 of 2008 a total of 7 warnings were issued by 5 Software & Computer Services companies compared to 9 over the same period in 2007. The Q3 figures equate to a total of 3% of the 145 listed companies operating in this sector which issued warnings.

Warnings in Electronic and Electrical Equipment also dropped, falling from 9 in Q3 2007 to 4 in the same period this year. The only increase in profit warnings from listed technology companies came from the Technology Hardware & Equipment sector, which saw a slight increase from 2 in 2007 to 3 over the same period this year.

James Bennet, technology director at Ernst & Young, comments,

“Q3 has been less challenging for software and IT services companies, mostly because they went into the downturn slightly earlier than other sectors. Over the past 24 months the IT and software services sector has been one of the most hit in terms of profit warnings.

“We would however express caution about the climate and the likely health of the technology sector in the coming two quarters, particularly with the dramatic downturn in the overall economy.”

Across all sectors in the UK, 111 profit warnings issued in the three months to 30 September 2008. This is the highest third quarter figure since Q3 2001 and up almost a third on Q3 2007. Size or status has proven to be little insurance against the current downturn.