Goldman on IT Spending and The Software Sector...
NEW YORK, Aug 13 (Reuters) - Goldman Sachs analyst Rich
Sherlund on Tuesday said anemic economic growth expected for
2003 may reduce earnings in the software sector.
In a research note, Sherlund said longer-term growth rates
for technology companies likely need to be lowered due to the
protracted slowdown in information technology spending.
Sherlund said tech spending for 2002 will likely be about
flat with last year and 2003 will probably see only 3 percent
to 5 percent growth, with much of that coming in the
second-half of the year.
"We believe there is considerable pent-up demand building
for IT projects, although getting funding is the constraint. IT
budgets are likely to remain constrained by sluggish corporate
profits," Sherlund said.
There is less urgency for information technology spending
then there was in the 1990s. Long-term growth rates for many of
the software companies may have to be cut to reflect a more
constrained technology spending climate.
If the December quarter is a bit better than expected, it
may lighten the cloud on investor sentiment, Sherlund said.
Results from Oracle Corp.'s <ORCL.O> August quarter may be
viewed as a bellwether for the rest of the software sector. If
the company's results are in-line with estimates they may be
seen as another sign of stabilization of the software business
following several quarters of earnings shortfalls and estimate
cuts, Sherlund said.
Sherlund said he preferred Microsoft Corp. <MSFT.O> in the
software sector because it stands to benefit from the deferred
revenue buildup over the past year. Any improvement in demand
for personal computers would also significantly add to its
earnings.
Sherlund said Siebel Systems Inc.'s <SEBL.O> rivals,
including SAP AG <SAPG.DE>, can work on product functionality
while market growth is constrained by information technology
budgets.
Siebel Systems shares were off 58 cents, or 6.7 percent, at
$8.12, and shares of Oracle were off 18 cents, at $9.55.
Microsoft shares were up 12 cents, at $48.59.
((-- New York technology desk, (646) 223-6191))
REUTERS
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