The Business Intelligence (BI) Index has outperformed the major stock indexes YTD on a relative basis but lags behind the S&P Software Index (IGV). The BI Index kept pace with the NASDAQ yesterday.
The YTD performance of the individual company stocks comprising the index is listed below.
Sun (JAVA) is the top gainer YTD but with no substantial changes to its business model it appears that after being the poorest performer in the index last year, its rise may just be an oversold bounce. There are a few factors to cause caution if considering jumping on this badwagon: hardware budgets are one of the first targets in IT budgets to be slashed, open-source source's impact of company of Sun's size not yet proven and no significant services group to smooth out perfromance.
The bottom dwellers YTD are the two analysts firms: Gartner(IT) and Forrester (FORR). These firms actually had slight gains in 2008 while most of the companies they review were experiencing bear market returns. Just recently investors have become concerned that these firms' services and consulting were also likely to get impact by the reduction in IT spending. Although we may feel their advise is invaluable, their services are a nice-to-have rather than essential.
The financial industry, by some estimates, accounted for 20% of IT spending prior to this bear market and whatever remains of this industry after the recovery is likely to be more frugal in its spending and will have less money to spend.
Another bottom dweller is Hewlett Packard (HPQ). HPQ and its CEO Mark Hurd had been Wall Street darlings until recently. Selective acquistions, cost-cutting and missteps by competitors have fueled handsome revenue and income growth during his tenure. But the weight of the recession and its impact on IT spending, particularly in hardware (servers, PCs and storage), has finnaly caught up with the stock. Excellent company and management but the depth and duration of the recession will determine where it goes from here.
The software companies in the BI index, although many being in the middle of the perfromance rankings YTD, alre likely to fare better and rebound quicker than other industries and even other high tech firms.
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