Mixed Signals on Tech Recovery

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Back in May I wrote a post about the increasingly optimistic outlook for technology spending. Analysts, vendors and CIOs seemed to agree that the worst of the economic meltdown was over and recovery-minded companies would increase their tech budgets.


Just about the only given with today's economy is its volatility. Still, it does look like tech spending could be bouncing back. A Bloomberg BusinessWeek article cites strong earnings and/or positive forecasts from tech vendors including Microsoft, Oracle, SAP and Adobe Systems. Dell said on June 23 it expects revenue to rise as much as 19 percent, compared with a 13.4 percent drop in 2009. (That was before a New York Times story on a lawsuit contending widespread quality issues ratcheted up bad publicity.)


The Businessweek article notes Microsoft has sold 150 million copies of Windows 7 since its rollout in October, making it the fastest-selling Microsoft OS ever. As IT Business Edge contributor Paul Mah wrote, a number of SMBs indicated they'd adopt Winows 7 even before release of the first service pack. Gartner attributes the strong sales to an increase in PC shipments and the fact that many buyers chose to skip Vista and are ready for an OS upgrade.


According to IDC, spending on PCs and other hardware will grow 6.4 percent this year, outpacing spending on software (3 percent) and services (1.5 percent). Gartner is predicting an even larger increase in hardware spending, of 9.1 percent.


The article does mention concerns over sovereign debt in Europe and a weak euro, factors that led Gartner to drop its global tech spending forecast from 5.3 percent to 3.9 percent.


The optimism apparently hasn't convinced investors, however. Technology stocks have taken a beating in 2010, showing a greater decline than non-tech stocks. Nasdaq computer stocks were down by 8.94 percent and telecommunications stocks down by 13.62 percent in the first half of 2010 vs. a 5.96 percent decline for stocks listed on the Dow Jones Composite index. Last week stock prices fell even for normally strong performers like Google and Apple.


While companies are spending, they are doing so with caution. David Fisher, SVP and general manager of IT consulting company Forsythe Solutions Group, says more companies are asking for some sort of estoppel clause in IT contracts, which would allow them to more easily halt projects if the economy worsens. After a slow start, Forsythe's business is picking up and Fisher says he is "cautiously optimistic."


It may be a while before we'll hear about optimism that isn't tempered with caution.