Cramer predicts dark times for data centres

By Shaun Nichols on Oct 26, 2009 8:53 AM
Filed under Communications

Analysts scoff at stock guru's assessment.

Stock analyst Jim Cramer ruffled feathers in the IT industry Thursday with a prediction that the datacentre market was heading for a crash.

Cramer said during Thursday's edition of his "Mad Money" television programme that new technology would allow companies to consolidate their data centres and slow the cycle for replacing hardware.

He cited Intel's latest line of Nehalem server chips in particular as an example of emerging technologies to shrink server volumes.

"All of these stocks are in the danger zone," Cramer was quoted as saying.

"I see an industry that is about to be brought low by new technology, so I think you should sell, sell, sell."

The comments were immediately seized upon by IT industry analysts, who issued a scathing review of Cramer's assessment and accused the analyst of being clueless about the nature of the server and datacentre industry.

Analyst Rich Miller laid into Cramer in a posting to his Data Center Knowledge blog.

Miller noted that processor breakthroughs have been following Moore's Law for decades, and that along with the ongoing progress in processor and hardware design, companies are compiling more data than ever and requiring larger and more powerful data centre systems.

"Nehalem processors will allow companies to do more with less, but they’re not going to empty out all the data centres," Miller wrote.

"When it comes to data centres, Jim Cramer is dumber than a bag of hammers."

Gartner analyst Lydia Leong echoed Miller's sentiments in a posting to her own company's blog.

Leong in particular defended Equinix, a data centre-hosting firm Cramer had singled out in his segment.

"Processing power has been increasing exponentially forever, but data centre needs have grown even more quickly, certainly in the exponential-growth dot-com world, but even in the enterprise," she wrote.

"There’s no reason to believe that this next generation of chips changes that at all, and it’s certainly not backed up by survey data from enterprise buyers, much less rapidly-growing dot-coms."

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