The strong US dollar is a pull against technology brands in an environment already suffering from fierce macro headwinds, service now CEO Bill McDermott told CNBC gym crme,
“You’re at 41 years of high inflation. The dollar is the highest it’s been in two decades now. We have interest rates going up. People are worried about security. You have a war in Europe. So, the mood isn’t great.” McDermott said in an interview that “aired on”mad Money“After the closing bell on Monday.
“You’re going to see dollar headwinds right now against well-known technology brands,” the CEO said. “No one is going to outrun the currency right now.”
Shares of ServiceNow, which helps companies and organizations digitize their workflows, fell 13% on Tuesday following McDermott’s comments that were meant as an overall industry overview, not ServiceNow-specific news, because The company was in a quiet period before making its latest report. Quarterly Earnings July 27
Tech stocks have been cashed in on a stock market grappling with geopolitical turmoil, high inflation, Federal Reserve interest rate hikes and a Covid-driven shutdown in China. Many tech giants are expected to report their quarterly earnings in the next month or so, setting the tone for the rest of the industry.
McDermott, however, insisted that tech companies are important in helping the US economy weather and move through this turbulent environment.
“When you think about energy, and the disarray caused by the war in Europe, and this re-evaluation I’m talking about, you’re going to see long cycles. [to close deals] in Europe. We saw that,” McDermott said. “But that doesn’t fundamentally change the narrative that technology is the only way to cut through the crosswind.”
The revaluation he is talking about is an increase in demand for rapid return on investment – another sign of caution in the current environment.
“There’s a new level or priority in the enterprise. And I’ve seen it, Jim, hitting a new gear since we last met. Where companies are first saying ‘what platform do we want to bet on? ,” and then try to sort out their priorities, McDermott said.
“There’s a filter to all of this now. And that’s faster return on investment. And if you can’t put an architecture in there that gives the customer a faster ROI, then chances are, you’re going to be put off,” he added.
Stifel said in a note Tuesday that she believes the company is “likely” to lower its expectations when it reports earnings, citing reassessments on McDermott’s comments. The investment bank expects other companies across the industry to follow suit in the coming weeks.