MONDAY, MAY 18, 2009
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Tech Spending Stirs, at Last
By MARK VEVERKA | MORE ARTICLES BY AUTHOR
Tech spending shows signs of life.
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THERE IS A SHRED OF EVIDENCE THAT THE SLIDE IN CORPORATE-technology spending may finally be coming to an end.
A survey by Goldman Sachs, which has been tracking tech spending since the dot-com boom, indicates spending "remains deep in contraction territory but seems to be searching for the bottom."
The bad news is that the investment firm's "total tech spending survey," which includes salaries, services, depreciation and other expenses, continued to decline since a previous study in February. The latest poll was taken in mid-April. But the good news is that Goldman's "tech capital-spending index," which tracks only spending on new software and hardware, bounced back slightly, although it remains in negative territory. This is the first upward move by either index since June 2008, providing "a glimmer of hope" that the indices are "likely nearing a bottom at very low levels," Goldman says.
Still, information-technology, or IT, managers are hardly ready to get their checkbooks out. Half the executives polled said they expected to spend "the same" during the June quarter as they did in the March quarter. About 33% said they thought their spending would dip from the previous quarter, and 17% said their spending would actually increase. "Given some signs of the stabilization in the economy, it is difficult to imagine how the second quarter of 2009 could be worse than the frigid conditions" of January and February, Goldman says.
The brokerage's pricing gauge also is showing early signs of stabilization. Less-aggressive price discounting should provide some relief to "best-of-breed" technology specialists, which have had difficulty matching slashed prices offered by big vendors such as Hewlett-Packard (ticker: HPQ), IBM (IBM) and Oracle (ORCL). These one-stop vendors that present "fewer throats to choke" have been able to bundle different products together, giving them more pricing flexibility. But now, the survey suggests that smaller competitors might start to see business pick up, albeit slightly.
The product categories that continue to be most susceptible to penny-pinching are personal computers, servers, new software licenses and information-tech services companies, such as Accenture (ACN).
Despite the hint of positive news, spending patterns don't seem to support the overly robust forecast for technology earnings. Tech stocks have experienced a decent rebound, along with the broader market. The Nasdaq Composite index clocked in around 1690 late last week, which is about 33% higher than the tech-heavy indicator's 2009 low of 1268 in March. Considering that spending is only just showing signs of improving, it would seem that tech stocks, which anticipated the turn, might be ahead of it now.
HP'S NEWLY HIRED STORAGE CZAR WAS unable to begin work as planned.
David Donatelli, who resigned from storage giant EMC last month (Plugged In, May 4) to become head of servers and storage at HP, temporarily was banned from starting his new job by a Massachussetts court, which cited a non-compete clause in his EMC contract. EMC had filed suit in Massachusetts, seeking an injunction, while Donatelli filed another lawsuit in California challenging the clause's validity.
The California court was expected to hear Donatelli's case Friday.
PLUGGED IN
Tech Spending Stirs, at Last
By MARK VEVERKA | MORE ARTICLES BY AUTHOR
Tech spending shows signs of life.
TEXT SIZE PRINT EMAIL DIGG SINGLE PAGE REPRINTS GET RSS Subscribe Now
With these readers:
Or copy the rss link:
THERE IS A SHRED OF EVIDENCE THAT THE SLIDE IN CORPORATE-technology spending may finally be coming to an end.
A survey by Goldman Sachs, which has been tracking tech spending since the dot-com boom, indicates spending "remains deep in contraction territory but seems to be searching for the bottom."
The bad news is that the investment firm's "total tech spending survey," which includes salaries, services, depreciation and other expenses, continued to decline since a previous study in February. The latest poll was taken in mid-April. But the good news is that Goldman's "tech capital-spending index," which tracks only spending on new software and hardware, bounced back slightly, although it remains in negative territory. This is the first upward move by either index since June 2008, providing "a glimmer of hope" that the indices are "likely nearing a bottom at very low levels," Goldman says.
Still, information-technology, or IT, managers are hardly ready to get their checkbooks out. Half the executives polled said they expected to spend "the same" during the June quarter as they did in the March quarter. About 33% said they thought their spending would dip from the previous quarter, and 17% said their spending would actually increase. "Given some signs of the stabilization in the economy, it is difficult to imagine how the second quarter of 2009 could be worse than the frigid conditions" of January and February, Goldman says.
The brokerage's pricing gauge also is showing early signs of stabilization. Less-aggressive price discounting should provide some relief to "best-of-breed" technology specialists, which have had difficulty matching slashed prices offered by big vendors such as Hewlett-Packard (ticker: HPQ), IBM (IBM) and Oracle (ORCL). These one-stop vendors that present "fewer throats to choke" have been able to bundle different products together, giving them more pricing flexibility. But now, the survey suggests that smaller competitors might start to see business pick up, albeit slightly.
The product categories that continue to be most susceptible to penny-pinching are personal computers, servers, new software licenses and information-tech services companies, such as Accenture (ACN).
Despite the hint of positive news, spending patterns don't seem to support the overly robust forecast for technology earnings. Tech stocks have experienced a decent rebound, along with the broader market. The Nasdaq Composite index clocked in around 1690 late last week, which is about 33% higher than the tech-heavy indicator's 2009 low of 1268 in March. Considering that spending is only just showing signs of improving, it would seem that tech stocks, which anticipated the turn, might be ahead of it now.
HP'S NEWLY HIRED STORAGE CZAR WAS unable to begin work as planned.
David Donatelli, who resigned from storage giant EMC last month (Plugged In, May 4) to become head of servers and storage at HP, temporarily was banned from starting his new job by a Massachussetts court, which cited a non-compete clause in his EMC contract. EMC had filed suit in Massachusetts, seeking an injunction, while Donatelli filed another lawsuit in California challenging the clause's validity.
The California court was expected to hear Donatelli's case Friday.
