Why the U.K. Panicked

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United Kingdom officials were in a panic when they ordered 1 billion pounds to be spent for a tech bailout. And now we know why.

A new report from Dow Jones VentureSource finds Europe's venture capital industry at a standstill. Only 209 deals were completed during the third quarter, the second-lowest number on record. Total investments declined 5% year-over-year, to 1.18 billion euros.

But it was the IT sector that took the biggest hit. Semiconductor financing was down 60% to 48 million euros. Information services (i.e., web) investments fell 52%. Software firms were the lone bright spot, attracting 24% more capital this year than last.

"Much like in the U.S., Europe's IPO market is virtually nonexistent and the turmoil in the broader economy is keeping many corporations from acquiring venture-backed companies," Jessica Canning, Director of Global Research for VentureSource, said in a press release.

That's understandable. Europe's top techies aren't exactly at the top of their games right now. Chipmaker Infineon (NYSE: IFX) lost $969 million in its fiscal fourth quarter and rejected a proactive bailout offer from the German state of Saxony. SAP (NYSE: SAP) cut revenue estimates in October. Siemens (NYSE: SI) this week acknowledged paying millions in bribes to win business overseas.

And while ARM Holdings (Nasdaq: ARMH) and Nokia (NYSE: NOK) are both strong franchises, they're alike in facing increasing competition from U.S. titans. ARM from Intel (Nasdaq: INTC) and its low-power Atom processor and Nokia from Apple's (Nasdaq: AAPL) iPhone.

A tech handout is still a bad idea. It bespeaks of panic. Nevertheless, after looking at the numbers, I can understand why some might do exactly that.

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