• BusinessWeek, Monday, July 14, 2008 12 PM

Tech stocks haven't exactly weathered the economic downturn as many optimists predicted: the NASDAQ has fallen 15% since Jan. 1, and some of its bellwethers have endured even more hurt: Google is off 22%, Intel is down 24% and Microsoft and Amazon are each down more than 30%. So much for being a safe haven.

It's strange, because most big techs have relatively light debt, large cash hoards, and substantial overseas operations. Wisdom would tell you that this is the place to invest in tight economy. But BusinessWeek says that these very factors, factors which insulated tech stocks during the first few months of the economic downturn, "now threaten to sink them." For starters, the dollar is now showing signs of strengthening. That means foreign revenue growth will be worth less, which could be particularly bad news, says Anant Sundaram, faculty director and finance professor at Dartmouth's Tuck Business School, for the likes of HP, IBM, Motorola, Sun Microsystems and Autodesk, who get more than half their revenues overseas.

Meanwhile, the weak U.S. economy is causing researchers to scale back their expectations for sectors like online advertising. In March, eMarketer cut its estimate for U.S. online market growth to $25.8 billion, shaving off nearly $2 billion from its prior estimate. Of course, Google and others claim that not only are advertisers not spending less online, they could be spending more thanks to the medium's measurability. Even so, tech investors are concerned that financial services firms and automakers, in particular, are cutting back their spending.

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