Stock analyst predicts dark times for datacentres

Datacentre stocks are 'in the danger zone', according to a financial analyst

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

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

The analyst cited Intel's latest line of Nehalem server chips in particular as an example of emerging technologies that will 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 on 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, noting that processor breakthroughs had been following Moore's Law for decades, and that, along with ongoing progress in processor and hardware design, companies are compiling more data than ever and requiring larger and more powerful datacentre systems.

"Nehalem processors will allow companies to do more with less, but they are not going to empty out all the datacentres," Miller wrote. "When it comes to datacentres, Jim Cramer is dumber than a bag of hammers."

Gartner analyst Lydia Leong echoed Miller's sentiments in a blog posting, defending datacentre hosting firm Equinix which Cramer had singled out in his argument.

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

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