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Wall Street Beat: Business as usual for tech, but gov't crisis casts shadows

Marc Ferranti | Oct. 7, 2013
The tech sector appears to be going about business as usual in the face of the U.S. federal government shutdown, but some industry insiders are nervous about a long-term stoppage or, even worse, the possibility of a debt default if a political compromise on the budget is not reached.

Technology was the strongest sector for IPO returns in the third quarter, according to a report this week from Renaissance Capital. Tech IPO returns benefitted from the performance of cybersecurity firm FireEye (up 106 percent from its IPO price); automated digital ad platform Rocket Fuel (up 81 percent); and cloud-based benefit management software provider BenefitFocus (up 83 percent).

Meanwhile, cloud-computing related tech sales are booming.

For example, adoption rates for Ethernet services are soaring, propelled by superior cost effectiveness, high-bandwidth scalability, greater availability, and overall flexibility for connecting to cloud and data center virtualization applications, according to a forecast released Wednesday by IDC. Ethernet revenue will increase from $6.2 billion in 2013 to $10.1 billion in 2016, according to the report.

A report from Gartner this week forecast that nearly half of large enterprises will have hybrid cloud deployments by the end of 2017. "In the past three years, private cloud computing has moved from an aspiration to a tentative reality for nearly half of large enterprises," according to the report.

Enterprise software sales have been positive recently. Open source enterprise software vendor Red Hat said last week that for the quarter ending in August, revenue was $374 million, an increase of 16 percent year over year. Net income was $41 million compared with $35 million a year earlier.

Oracle, the first major vendor to report sales through August, said last month that revenue was $8.4 billion, up 2 percent year over year, and net income was $2.2 billion, up 8 percent.

Economists and tech industry watchers, meanwhile, are hoping for the best.

"This morning there are several reports suggesting moderate Republicans are wavering in their hard line stance and may be willing to compromise on Obamacare in exchange for a repeal of the medical device tax. Needless to say this is just a beginning but still a step in the right direction if a compromise is ever to be reached and normalcy restored in Washington," according to a research note by Lindsey Piegza, managing director and chief economist at Sterne Agee.


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