On the brink of another tech crash?

The writing on the wall looks ominous. A long list of tech stalwarts, including BMC, Business Objects, CA, PeopleSoft, StorageTek, Unisys, Veritas and Yahoo!, have seen their stocks fall - sometimes quite dramatically - in recent days and weeks, often on the back of warnings about quarterly figures.

Meanwhile the Nasdaq high-tech index once again fell yesterday (Thursday) after a dismal week.

One well-known UK analyst, Ovum's Richard Holway, is saying what many others dare not say: tech stocks are once again over-valued - and he called a market correction well before now.

Although the bad news seems to be gathering pace this week, Holway has been bearish on tech stocks for some time, countering the wave of optimistic sentiment from some camps that has accompanied the tech recovery of the past 12 months or so.

Today he told silicon.com: "There are a high number of people [in the industry] who are desperately hoping things are on the up but at the end of the day you have to face reality. You cannot justify sky-high valuations on the basis of single-digit growth."

In a research note as recently as 1 July he referred to a beginning-of-year prediction that Nasdaq will drop 20 per cent over 2004. He is not completely alone in such an assessment and cites reasons including:

- interest rate rises putting a dampener on consumer spending;
- higher interest rates hitting corporate capital expenditure, denting profits;
- IT departments not freeing up funds for technology as quickly as some have forecast;
- public sector IT spend reaching a peak;
- a weak dollar (which inflates many US-based vendors' earnings from overseas) not lasting forever;
- more fiscal prudence from the US after this year's Presidential election, meaning a tougher global economic climate.

The note ends with the instruction "Pray I'm wrong this time."

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Read our leader article here for more on this subject.