Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (62616)	1/5/2003 10:21:39 AM
From: hueyone	Read Replies (1) \| Respond to of 77400

online.wsj.com Barrons, 1/6/03 Grim Tidings for Tech Spending AFTER NEARLY THREE YEARS of doom and gloom, we as much as anyone would like to believe that tech spending will improve in earnest this year. But we can't. The evidence simply isn't there to support the notion that corporate buyers are ready to load up on new hardware, software and services. Consider the findings of the Goldman Sachs information-technology spending survey. As we have pointed out before, tech spending surveys aren't always reliable predictors of the future, but the Goldman effort has served us well throughout this dreaded downturn. That's not to say that surveys by Merrill Lynch and others are without merit. (Are you listening, Mr. Milunovich?) It's just that the Goldman survey has provided an apples-to-apples comparison of periodic corporate-spending sentiment, and it has worked reasonably well thus far. For instance, the survey accurately predicted a spending spurt at the end of the year that just closed. And with that, we're compelled to report that the latest survey indicates spending could be significantly lower than expected. "The outlook on 2003 spending takes a surprisingly sharp turn downward," says the report, issued last Thursday. We are not trying to be an alarmist, but the news is unquestionably grim. The weighted-average outlook on this year's spending deteriorated from as much as 3% growth -- the forecast of two prior Goldman reports -- to a decline in spending by 1% for the year. Remember, this is an industry that was used to seeing 14% annual hikes in corporate IT spending during the boom. Then, we were told to get used to 10% increases. Then, we were willing to settle for 5% growth, or any growth at all. Now respondents to the survey say they expect to spend less in 2003 than the year before. While the direction of the change, from positive to negative, is worrisome in and of itself, the magnitude -- as much as four percentage points -- is also notable, said software analyst Rick Sherlund and enterprise hardware analyst Laura Conigliaro, who run the survey. "Contrary to reports of stabilizing IT spending and investor optimism heading into 2003, our latest survey (which was conducted prior to the holidays in December) shows worsening across the board, with some of our indicators hitting new lows and a bias toward an expectation of further tightening," Sherlund and Conigliaro say. The pessimism stems from a lack of belief in a broader recovery outside of tech and concerns about a potential war in Iraq, the analysts report. Whatever the reasons, the sentiment of the IT executives in the survey "does not bode well for business conditions in the first part of the year." In short, IT decision-makers came out of their fall 2002 budgeting sessions with less money to spend in 2003 than they thought they would have. For example, the percentage of Goldman's respondents in December who expected spending to decline swelled to 37% from 23% in October and 16% in August. In fact, the Goldman analysts say they have never seen a more dramatic swing in their annual weighted survey than the most recent one Unsurprisingly, based on what we have heard so far, 67% of those surveyed said that they see belt-tightening to be more common than belt-loosening in early 2003. That isn't what the marketing mavens of the country's tech giants have been saying. Over the course of the holidays, marketers and software salesmen leaned over the eggnog bowl to say that orders and commitments were picking up. There clearly is a disconnect between corporate customers and the purveyors of tech, and that is reflected in stock valuations. Consensus estimated revenues for enterprise tech companies are flat for the first half of 2003, with 7% growth expected for the year, Sherlund and Conigliaro say. That's too high, the analysts suggest. Now more than ever, Wall Street needs to lower its expectations.