XPDR is having its earnings release on Tuesday, same day as MMWW.. I still like CYSV best for the sector and of course EDS..
Analyst likes EDS.
William Loomis, Legg Mason Wood Walker, Inc.
WILLIAM R. LOOMIS is a Managing Director and Group Head of the Technology Research Group at Legg Mason Wood
Walker, Inc.
TWST: I'd like to begin by asking each of you to comment on the development of information
technology services, and what has driven this industry over the past five years. Bill, will you
begin?
Mr. Loomis: In general, what drives the IT market are things that change business models, whether
it's deregulation or the Internet or other types of technology. Over the past five years, we've had a couple of trends. The Y2K
and ERP trends started out in the mid-1990s to 1998, but since then, really e-business has been the biggest driver in the past
two years and we think it is going to be the biggest driver for the next several years.
TWST: Bill, what are you predicting for the growth of IT spending in 2000, 2001?
Mr. Loomis: Well, we're looking for IT growth somewhere in the 10% a year range for the overall $300 billion plus market. But
each segment is going to grow differently. The e-business space, which is about $13 billion plus of that $300 billion, we're
expecting to grow in the upper 50s%, low 60s% range. So we see that e-business segment growing much more rapidly than
the broader market. We expect to see strong growth from certain segments that were hurt badly by the Y2K deferral -- like
application maintenance, large custom development, and package implementation, in particular the enterprise resource
planning that had negative growth or no growth in 1999. We expect to see that return to more normal 20%-30%-type growth
over the next couple of years in these Y2K-impacted areas.
TWST: Bill, what heads up your list of recommendations?
Mr. Loomis: Well, on the big cap side we like EDS (NYSE: EDS). We have a buy on the stock. We think that the company is
re-establishing its leadership role that it lost back in 1996, after it split off from GM (NYSE: GM). And we think that their new
management that came on in January 1999 has refocused the company on the fast growing sectors of the marketplace,
such as e-business. This can be seen in the formation of their e.solutions unit last spring and then the announcement with
Ariba (Nasdaq: ARBA) on their partnership. The stock, I think shows that EDS is committed to some of the fastest growing
areas of IT services, such as e-business. So we like the changes at EDS, and that's, we think, a core holding in IT portfolios.
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