Microsoft and Intel should gear up for slower sales -

One of the IT industry's bellwethers, Seattle City Council, has said that it is cutting its budgets by six percent, sending a warning to the likes of Intel and Microsoft that dark days are ahead.

Seattle's chief technology officer, Bill Schrier, said that this is a sign of tighter spending that indicates slower sales gains for Vole and Chipzilla.

Speaking to Bloomberg, Schrier said that spending was going to be down, and in some places it's going to be down considerably.

He is likely to be told to cut even more next year, so he's delaying upgrades to Microsoft's Windows 7, cutting services contracts from IBM and seeking cheaper alternatives to gear from Cisco.

Schrier said that belt-tightening in the biggest city in the Pacific Northwest is part of a much larger trend and he thinks that financial-services companies and governments, including the state of California, will cut or leave spending on information technology unchanged next year as economic growth slows.

While traditional tech outfits might do badly out of it, others might do rather well. There are signs that some businesses are trying to stretch their spending by using products that are designed to save money, such as Vmware. Other outfits which might do well are Citrix and SAP.

Michael Holland, chairman of Holland & Co., which oversees about $4 billion, including shares of Microsoft, Intel and IBM has said that it would be realistic is to expect things to be "a little less than the level that they were this year."

The cocaine nose jobs of Wall Street are taking the warning seriously and it seems that options traders don't think it is wise to invest in technology these days.

This is coupled with the fact that PC shipments will drop by as much as 13.4 percent in the first quarter because of supply constraints and rising prices related to flooding in Thailand.