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The slowdown in spending ate into vendors' profits in 2008. Thirty companies in the CIOZone 100 reported losses for the year, and net income fell 16% to $65.6 billion from $78.2 billion. By contrast, in 2007, net income among the CIOZone 100 leapt 25%, and only 20 of the companies were unprofitable.
Some companies that get a lot of their revenue from software had an easier time bucking the trend and increasing their profits in 2008. For instance, net income at IBM (No. 2), which derives more than a fifth of its revenue from software, jumped 18%. IBM's middleware products have become increasingly important at a time when companies are consolidating and looking for ways to connect disparate applications and streamline their operations, says Buell Duncan, vice president of marketing for IBM's software group. For instance, Duncan said, Bank of America is using IBM's middleware to integrate parts of Merrill Lynch, which BofA bought at the beginning of this year.
Not every software company was profitable, however. The security vendor Symantec took a huge writedown in connection with some of its acquired businesses and had a $6.3 billion loss, versus a $350 million profit in 2007. The $6.3 billion deficit was the largest of any company in the CIOZone 100.
Other sectors showed similar company-by-company differences. For instance, the popularity of the iPhone and Blackberry led to revenue increases of 25% and 84%, respectively, for Apple (No. 7) and Research in Motion (No. 16). Meanwhile, Palm, a former leader in device technology, spent 2008 readying its new Pre smart phone; with that product still in the pipeline, Palm's revenue fell 23% and the company lost $651 million.
As if the unraveling of the economy were not enough, many big technology companies also had to deal with negative fallout from the strengthening of the dollar. The dollar rose as much as 10% against most major currencies between the beginning and end of 2008, hurting U.S. companies that have increased the percentage of business they do abroad. Such companies must translate back into dollars the revenue they generate in other currencies. When the dollar is strong, the reported revenue is lower. For instance, Oracle recently said that currency conversion would have a negative impact of 12% on its current quarter.
"Especially for the big vendors who went overseas, they lived by the dollar and died by the dollar" in 2008, says Forrester's Bartels.
Next: The CIOZone 100 in 2009
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