Associated Press
NEW YORK -- Jeffrey Saut doesn't need a minutely detailed analysis to get a read on the technology sector -- the chief investment strategist at Raymond James Financial Services can get an idea from just looking around his office.
"We have 5,400 retail brokers and I forget how many on the capital market side, and a lot of them are using older computers," Saut said from his Tampa, Fla., office. "The accounting life of this equipment may be over, the useful life definitely isn't."
Raymond James isn't buying new technology, and neither are thousands of other companies -- because there's nothing that they're really motivated to buy. While computer hardware has certainly improved, the software that led to great leaps in business productivity is sorely lacking. And until new innovations attract corporate interest again, technology companies' profits -- and their share prices -- are unlikely to grow substantially.
Technology innovation and the resulting billions spent by businesses on those improvements fueled much of the stock boom of the 1990s. Now, however, not only are businesses curbing capital spending due to slow economic growth and a fear of falling profits, ever since the Y2K bug prompted a wave of buying, corporate purchasing programs have become much smaller and far more selective.
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For tech stocks, that has meant more than three years of mediocre stock prices and disappointing returns that are likely to continue.
In the past, there was a strong correlation between technological innovation and broad-based stock rallies, especially when those innovations were readily useable by corporate America.
But now, there's no overriding reason to spend big on technologies because the innovation of the 21st century has been incremental, rather than revolutionary.
Incremental innovation won't encourage businesses to part with their capital, thus starting a new rally in an otherwise flat market.
