Tag: economic

IT spending still in the doledrums

quicksand1Worldwide IT spending is only going to increase by a miserable 0.6 per cent, according to beancounters at Gartner.

According to Big G fortune tellers, worldwide IT spending is forecast to total US$3.54 trillion in 2016, just a 0.6% increase over 2015 spending of US$3.52 trillion.

Last year saw the largest US dollar drop in IT spending since Gartner began tracking IT spending.  $216 billion less was spent on IT in 2015 than in 2014.  Gartner predicts that 2014 spending levels will not be surpassed until 2019.

John-David Lovelock, research vice president at Gartner blamed the rising US dollar. “US multinationals’ revenues faced currency headwinds in 2015. However, in 2016 those headwinds go away and they can expect an additional 5 per cent  growth.”

PCs, ultra-mobiles, mobile phones, tablets and printers are forecast to decline 1.9 per cent in 2016. This is because of a combination of economic conditions preventing countries such as Russia, Japan and Brazil from returning to stronger growth. There is also a shift in phone spending in emerging markets to lower-cost phones, is overlaid with weak tablet adoption in regions where there was an expectation of growth, Big G wrote.

Ultra-mobile premium devices are expected to drive the PC market forward with the move to Windows 10 and Intel Skylake-based PCs.

Gartner has slightly reduced the speed of adoption over the forecast period, as buying in Eurasia, Japan, and the Middle East and North Africa moves away from purchasing these relatively more expensive devices in the short term, but expect them to revert back to buying in 2017 as the economic environment stabilizes.

Data center systems’ spending is projected to reach $75 billion in 2016, a 3 per cent  increase from 2015. Demand in this segment is expected to continue to be strong through 2016.

The worsening economic environment in emerging markets has had little effect on the global enterprise software spending forecast for 2016, with IT spending on pace to total $326 billion, a 5.3 per cent increase from 2015. Key emerging markets, particularly Brazil and Russia, face escalating political and economic challenges.

Spending in the IT services market is expected to return to growth in 2016, following a decline of 4.5 per cent in 2015. IT services spending is projected to reach $940 billion in 2016, up 3.1 per cent from 2015. This is due to accelerating momentum in cloud infrastructure adoption and buyer acceptance of the cloud model.

Telecom service spending is projected to decline 1.2 per cent in 2016, with spending reaching $1.45 trillion. The segment will be impacted by the abolition of roaming charges in the European Union and parts of North America. While this will increase mobile voice and data traffic, it will not be enough to counter the corresponding loss of revenues from lost roaming charges and premiums.

Big Blue doing better than expected

IBM has surprised analysts by giving them a better forecast for 2013 than they expected.

The company already had a solid fourth quarter despite economic doom which saw most of its customers hold off on IT purchases.

In the US, companies were not spending anything until the government sorted out its bizarre fiscal cliff stand-off.  IBM said its quarterly results beat forecasts and it plans to achieve better than expected earnings next year too.

Some analysts think IBM’s earnings may be a sign of an improved tech spending environment, but others, who don’t like being surprised by Big Blue, think that the strong results were specific to IBM’s business model.

Cindy Shaw, managing director at Discern, told Reuters that IBM is better positioned for a tough environment thanks to getting rid of its hardware and buying PriceWaterhouse’s consulting business.

At the moment IBM is better than most, other than Accenture, at solving business problems.

IBM was good in “hot growth markets” such as data analytics, cloud computing, and emerging markets. In fact, all those buzz word areas that other tech companies say they are heading towards, IBM has already been there and sent the others a postcard.

Sterne Agee analyst Shaw Wu added that the idea of vertical integration of hardware and software has been difficult for other companies to copy. This is mostly because IBM has been at it longer and customers are used to the reassurance of the men in suits. IBM has a much stronger offering and brand name, Wu said.

Quarterly net income rose 10 percent to $6.1 billion. Revenue dropped one percent to $29.3 billion due to the sale of its retail business in the third quarter.

Analysts thought IBM would report net income of $5.95 billion, or $5.25 a share, on revenue of $29.05 billion.

Revenue grew in particular because of an 11 percent increase in Brazil, India, Russia and China. The company’s software revenue was up three percent in the quarter. 

IBM misses targets

IBM sheepishly posted a quarterly revenue miss claiming punters had avoided buying really expensive computers and the stronger dollar gutted the company’s top line.

According to IBM, businesses and governments are holding back on spending on information technology amid economic uncertainty in Europe and ahead of the US elections next month.

Net income fell to $3.82 billion from $3.84 billion a year ago while net income, excluding acquisition costs, rose five percent to $4.2 billion

Some of that income loss was also due to IBM losing a UK court case related to pension fees.

The over valued state of the US dollar cost IBM more than a billion dollars and revenue fell by five percent to $24.7 billion. This was worse than Wall Street had expected. They had predicted that revenue would fall by three percent to $25.36 billion.

Chief financial officer Mark Loughridge tried to put a brave face. He said that the third quarter started on a stronger trajectory than the company saw for the full quarter.

A handful of deals fell out of the quarter when IBM thought they were certain.

It seeams that IBM was hoping that Mexico and Australia would have done a bit better, but sales in these countries slumped.

Analysts were not prepared to write off IBM. Global Equities Research analyst Trip Chowdhry told Reuters that customers are holding off with purchases ahead of the US presidential election, going ahead only with smaller buys instead of replacing entire systems.

There is also the not-so simple matter of Europe sorting out its debt problems. Some analysts think that numbers for IBM will get better as this was always going to be a soft quarter.