The tech sector recovery will leave some behind

WHEN Apple sneezes, the whole technology industry catches a cold. That&rsquo;s why its stunning results earlier this week saw analysts reaching for their rose-tinted spectacles. With the news coming hot on the heels of a bullish outlook from chipmakers Intel and Texas Instruments, several pundits called an end to the technology sector&rsquo;s woes.<br /><br />Yesterday&rsquo;s Gartner figures on global PC sales were also better than expected, with preliminary figures for the second quarter of 2009 showing that the market might have bottomed out. The research firm estimates that 68.1m units were shipped in the quarter, five per cent down on the same period in 2008 but still much better than the ten per cent drop that was feared.<br /><br />There are, of course, exceptions to the rule. Microsoft posted its first drop in revenues since it went public in 1986 yesterday, as sales of its Windows software plummeted.<br /><br />It&rsquo;s no longer enough to blame poor performance on the downturn alone, however. Instead, the recent crop of results from the tech sector shows that recession has left the industry landscape massively altered.<br /><br />Gartner&rsquo;s research on PC sales offers a good snapshot of what has changed. The biggest winner was Acer, which specialises in cheap, portable computers that are rarely sophisticated enough to run Microsoft&rsquo;s Windows Vista or the soon-to-be-released Windows 7 (instead they come with Linux or the low-margin Windows XP).<br /><br />The Taiwanese firm shipped 9.2m units in the second quarter, a staggering increase of 34 per cent on the same period last year, catapulting it into second place.<br /><br />Conversely, market leader Dell, which makes fully-featured mid-market PCs that are always pre-loaded with the latest version of Windows saw its shipments fall by 17 per cent to 9.3m, just a whisker ahead of Acer.<br /><br />This is a trend that will continue apace in the coming years, with consumers buying cheaper physical technology that gets its power from super-fast broadband connections and the increasingly sophisticated applications that are available online, like Google Docs and music jukebox Spotify.<br /><br />There will still be a market for the latest high-end gadget, as Apple has shown by selling 5.2m iPhones in its second quarter &ndash; a 626 per cent increase on the same period last year. But the mid-market technology product will be squeezed by iPhone-like gadgets from one end and low-price insurgents from the other.<br /><br />Nintendo, the pioneer of the cheap but incredibly successful Wii will be a winner while Nokia, which made its name selling mid-market phones to the masses will lose out, especially if it fails to come up with a convincing iPhone competitor soon.<br /><br />So the tech analysts are right to be reaching for their rose-tinted glasses; the effects of the downturn are probably coming to an end. But those firms that rely on sales of middle-of-the road high-margin products to the Mondeo Man will continue to suffer.