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Weaker Tech Market in 2007? Post Reply Rate topic
billywows Elite	13-Aug-2006 13:11        billywows About Contact  Quote this Post!
x 0   x 0  Alert Admin	Sounds bad next year ....... buy tech now and sell by April '07? ------------------------------------ Growth In US Tech Spending On Course In '06,To Slip In '07 August 11, 2006: 15:22 p.m. EST NEW YORK -(Dow Jones)- The U.S. technology industry is expected to continue to see sales growth for the rest of the year, as buyers compensate for not purchasing earlier in the decade. But that pent-up demand may ease in 2007, when growth rates are expected to decline. Growth in spending on information technology is seen slowing to 3% to 6.9% next year, according to four major technology-industry research firms surveyed by Dow Jones Newswires. These firms said the growth rates in 2006 should rise by 5% to 7%. The slowdown will come as the boost from restocking subsides and economic growth slows, perhaps significantly. "The real slowdown is in 2007," said Andrew Bartels, an analyst with Forrester Research of Framingham, Mass. Bartels expects cutbacks in IT spending in the consumer, manufacturing and financial-services industries if the economy continues to slow down. But some industries are expected to continue strong investments in technology. They include those that aren't as directly affected by broader swings in consumer spending, such as health care, and those with significant exports that benefit from a weaker dollar, such as food and beverages. Gartner Inc., a Stamford, Conn., industry-research firm, said worldwide IT spending in 2005 was $2.7 trillion. Gartner expects it to rise to nearly $2.8 trillion in 2006 and $2.9 trillion in 2007. Technology vendors themselves are sending mixed messages about the health of the market that might reflect a growing divide in fortunes as the industry growth rates subside. Companies are focused more on increasing sales at the expense of rivals rather than riding the wave of an expanding market place. Software May Do Better Software is an area that might take less of a hit than other segments in 2007 in terms of slackening growth rates. Fenella Sirkisoon, a research director for AMR Research of Boston, said companies have refreshed their hardware stock and now are ready to boost the software infrastructure and middleware, which helps bind together separate and frequently already existing programs. Pricing also is seen firming on the software side, where consolidation has reduced the number of vendors that can supply large companies. "In large software suites, there's only a few choices these days, which makes it a little less of a buyers market," said Joseph Cleveland, chief information officer at Lockheed Martin Corp. (LMT). That would benefit software vendors such as Oracle Corp. (ORCL), International Business Machines Corp. (IBM) and Microsoft Corp. (MSFT), all of which have boosted product offerings by acquiring smaller companies. The expected slowdown in the growth rate for technology spending might mean competitors will become even more eager to rip customers away from other companies. Oracle President Charles Phillips said at an analyst meeting last month that the company doesn't foresee a great acceleration in IT spending; rather, the opportunities lie more with taking market share. But Xerox Corp. (XRX) is seeing "a steady flow of good activity with large enterprises," Chief Financial Officer Lawrence Zimmerman told Dow Jones Newswires following Xerox's second quarter earnings report in July. Zimmerman, who noted Xerox had a better second quarter than first quarter, is confident tech spending on the part of corporations will hold up for the remainder of the year - even if the economy worsens. IBM said when it reported second-quarter earnings July 18 that the company is seeing a divergence between its enterprise-business customers and its small- and medium-size business customers. IBM Chief Financial Officer Mark Loughridge said the company saw longer sales contracts from enterprise customers during the second quarter, particularly at the end, while growth in the small- and medium-size business market remains " solid." Company Priorities Mellon Financial Corp. (MEL) is keeping its tech spending budget flat this year and next. Chief Information Officer Kevin Shearan said Mellon is spending more than half of its IT budget on applications, with the rest going to infrastructure. The financial-services company is in the last throes of completing a new data center, which will require new hardware systems. On the application side, Shearan said the company is spending on security and is spending to make sure data in transit is being protected. For example, Mellon has encrypted all of its laptops so sensitive data won't be accessed if an employee loses a mobile computer. Shearan said Mellon is seeing a firming in pricing for software applications that are in hot demand because of new government regulations. New industry-wide requirements tend to hurt from a pricing point of view, he said. At Lockheed, spending on technology is on the rise this year, albeit slightly, with growth expected in 2007 as well, according to its CIO Cleveland. The company also is focused on replacing its legacy systems, which requires new software, storage and server purchases. Lockheed expects to upgrade to Microsoft's upcoming operating system Vista, though Cleveland said the company won't necessarily buy more personal computers as a result. Vista, the first update to the Windows operating system in five years, is scheduled for release for corporate buyers in November. The operating system isn't expected to provide an instant boost to spending. For example, Jupiter Research said its survey of 207 companies with at least 100 employees showed that nearly 50% won't deploy it or will wait at least a year. Vista doesn't really require faster speed chips and is focused more on improved multimedia functions such as graphics and security. The impact is unlikely to be the same as it was for Windows 95, said analyst Steve Minton of IDC, Framingham, Mass. That update required both consumers and corporations to buy new hardware in droves in order to run the system. UnitedHealth Group Inc. (UNH) spokesman Mark Lindsey said the company expects to continue its "substantial investment" in technology, particularly for software. For example, the company expects to continue to increase its current rate of 80% for electronic submission of claims.
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