U.S. downturn to hit tech hardware more than software

By Jim Finkle and Philipp Gollner

BOSTON/SAN FRANCISCO (Reuters) - As comments from tech bellwether Cisco Systems Inc spur recession fears this week, companies focused on computers and consumer gadgets are seen to be among those most vulnerable to a downturn.

Analysts say business software makers are better placed to ride out a U.S. recession as they help companies to work more efficiently, but prospects are dimmer for computer hardware manufacturers like Dell and Hewlett-Packard, as well as microchip companies Intel and Advanced Micro Devices.

"If there's a downturn, not all sectors will be affected equally," said analyst Stephen Minton of market researcher IDC. "The first round of cuts would affect the PCs and the devices and the software that goes directly onto those PCs and devices."

Corporate tech executives "want to protect their data center projects," he added.

Cisco Chief Executive John Chambers said on Wednesday that companies were increasingly worried about the economy. "It's the most cautious I've seen CEOs in the U.S. and Europe in many years," he said after issuing a disappointing revenue outlook.

Nucleus Research analyst Rebecca Wettemann, who helps executives figure out how tech investments can boost or hurt profits, said companies anxious to control spending were willing to use hardware, such as Cisco's routers, until it breaks.

"They are saying: 'If I can't find a direct relationship between the infrastructure and the value it is delivering, then I am hesitant to invest,'" Wettemann said.

Data storage makers EMC, HP and Sun Microsystems are also vulnerable because of excess capacity among many corporations, said Yankee Group analyst Zeus Kerravala. HP and Sun also sell servers and software.