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To: Wyätt Gwyön who wrote (62589)	1/2/2003 11:18:06 PM
From: elmatador	Respond to of 77397

Drop in IT spending could hit tech sector By Tom Foremski in San Francisco Published: January 2 2003 19:12 \| Last Updated: January 2 2003 19:12 A surprisingly sharp drop in information technology spending by large US companies could mean technology companies miss their earnings forecasts for the March quarter, according to Goldman Sachs. The US brokerage on Thursday released the results of a survey of IT budgets for 100 of the largest 1,000 US companies. The survey could foreshadow a trend of lowered revenue and earnings guidance as leading technology companies announce their December 2002 quarter results later this month. “In our view, risk remains to the downside for consensus 2003 estimates [for technology companies] while tech valuations remain at lofty levels relative to the S&P 500,” Goldman's analysts said. The Goldman survey, which did not name technology companies that might not meet their forecasts, was conducted during December, a key month for setting the following year’s IT spending budgets. It found that the outlook for spending in 2003 had deteriorated to a 1 per cent decline compared with estimates of 2-3 per cent growth in a previous survey conducted just two months ago. “We are surprised by themagnitude of the decline,” Goldman said. The lack of “game changing technologies” and little pent-up demand indicates a bleak beginning to 2003 for technologycompanies. It also dashes hopes that IT spending in 2002 hadstabilised and would offer moderate growth in 2003. Earlier IT spending surveys had shown some signs of stabilisation with potential long-term growth of 6 to 7 per cent a year, though still well below the 10 to 12 per cent annual growth rate seen during much of the 1990s. Goldman's latest estimate for long-term growth in IT spending has been cut to 5 per cent. About two-thirds of the companies surveyed said budget cuts were more likely than budget increases in early 2003. There was an increase in the number of respondents that now expect IT spending plans to increase in 2004 rather than later this year. Technology companies have weathered a tough year in 2002as corporations worldwide have cut back on IT investments because of uncertain economicconditions. This has led to a price war in some IT sectors as tech companies have been forced to compete by discounting prices. The Goldman survey indicates that the discounting of IT products is likely to continue, with 56 per cent of respondents saying that discounting is on the rise. With a moribund PC market, and further cuts in corporate IT spending, the tech sector appears to be headed for further weak business conditions. This will also affect the semiconductor sector, which is struggling to recover from a disastrous 2001 in which global sales declined 32 per cent, and with virtually no growth in 2002. The only bright spot on the horizon is that companies might begin a large PC upgrade cycle later this year to replace millions of ageing PCs.