Techbubble fud is ready to burst

While we have not noticed it, Business Insider  claims that the tech industry is booming and is waiting with its fingers in its ears waiting for a bubble to burst.

To be fair to Business Insider there are some similarities to the last time the industry bubble burst, in 1999, taking with it most of the IT industry.

The stock market is at an all-time high. Tech start-ups with no revenue have billion-dollar valuations and Interest rates are effectively at zero percent.

Business Insider claims that since everyone has their money in tech shares, these are all hopelessly inflated. The sharemarket goes in waves and we are due for a downturn.

But where Business Insider is wacky is that it seems to believe that the tech industry is doing rather well. The article believes that developers are all in work and making a fortune out of their work.

In fact, anyone would tell you that is simply not the case. Unlike 1999 where all you needed to do was run a to make any money at all, the tech industry is still depressed and most companies are restructuring. The biggest companies are actually suffering, only Google is doing particularly well. Even Apple is not making the huge amounts of cash that it collected in the past.

Microsoft, IBM, HP, Cisco and Oracle need for the rest of the economy to pick up to see serious money arrive. That will not happen until businesses start buying PCs and servers again.

While tech companies, led by Mark Zuckerberg at Facebook, are lobbying Congress to relax immigration rules so they can hire more foreign talent because they believe domestic talent is too scarce and too expensive. However, that does not mean that there is a lot of talent out there still sitting on the dole.

Rather than suggesting that the tech industry is in a bubble, there appears to be a soft state of companies emerging. Business Insider mentions  start-ups which are worth billions but are to make a profit. Twitter would be an example.

Other companies it cites, such as Supercell, the game company, just raised $1.5 billion in new funding at a valuation of $3 billion, are exceptions rather than the rule. Supercell has real revenue, $178 million in Q1 alone, but the rest of the game industry is not doing so well.

What Business Insider is seeing is a soft state where some companies are doing extremely well, while others are frantically restructuring. It is possible that some of the new comers will do badly, but it is equally possible that some of them will do well.

As far as the industry is concerned, it is still too depressed to worry about any bubbles bursting yet.

Where we might see problems is in the Internet advertising world generally. It is a complete mess and getting messier with Facebook running around trying to sell advertising. Advertising companies have no idea how to run Internet advertising campaigns and content makers which were dependent on them knowing their arse from their elbow are disappearing fast through lack of advertising.

Business Insider is concerned that while serious investors are beginning to suspect a tech bubble has formed, and that a crash is coming, this is more Chicken Little type warnings which might scare smaller investors.

The technology industry is in the worst state since we started reporting in the 1990s and has still not recovered from the long recession. It is far too early to worry about tech-bubbles bursting yet.