BOSTON: Warning to investors: vital U.S. record companies could skip estimates for fourth-quarter gain as “fiscal cliff” worries approaching led some corporate clients to tie their belts final month and refrain from spending all of their 2012 IT budgets.
Tech companies customarily humour a spike in orders in Dec as companies use income left over in their budgets to buy products on their wish lists – information record products that are good to have, rather than essential.
But a supposed year-end check flush was not as low in 2012 as in standard years, according to tech analysts and other experts citing conversations with corporate record buyers and sales sources. They pronounced companies hold behind on IT purchases in Dec in partial since of Washington’s long negotiations to equivocate a mercantile cliff, that is a package of involuntary taxation hikes and spending cuts that could have pushed a already soothing U.S. economy into recession.
It took until late on Jan 1 for House Republican lawmakers led by John Boehner to establish to a check to avert a cliff, that President Barack Obama sealed into law a subsequent day.
“CIOs and CFOs were not creation investments,” pronounced Andrew Bartels, an researcher with Forrester Research who advises corporate record buyers. “If Boehner and Obama had been means to strike a understanding by around Dec 15, we would have had end-of-quarter investments.”
Analysts contend they design tech spending to sojourn resigned by during slightest a initial quarter, as businesses wait to see if Congress can solve another appearing mercantile fight, this time over a debt roof and sovereign spending cuts.
Wall Street has already significantly lowered expectations for a tech sector, that has been underperforming a altogether market.
The Street now expects tech companies in a SP 500 to news a 1.0 percent dump in fourth-quarter earnings, opposite an normal 2.8 percent arise for companies in a full SP 500. Three months ago, analysts were awaiting tech zone gain to arise 9.4 percent in a fourth quarter, according to Thomson Reuters I/B/E/S.
First-quarter tech distinction expansion estimates have also been lowered to 2.6 percent, from 9 percent 3 months ago, according to Thomson Reuters I/B/E/S.
Greg Harrison, a corporate gain investigate researcher with Thomson Reuters, pronounced he expects analysts will cut their predictions serve after tech companies news fourth-quarter results.
Intel Corp will news a quarterly gain on Jan 17, a initial of a organisation of vast tech companies reliant on craving spending. Intel will be followed by IBM, Microsoft Corp and EMC Corp after in January. Cisco Systems Inc, Dell Inc and Hewlett-Packard Co tighten their quarterly books in about a month.
Mark Luschini, arch investment strategist during Janney Montgomery Scott, that manages about $54 billion, pronounced he generally expects fourth-quarter tech formula to disappoint, though has nonetheless to establish by how much.
He expects a indolent opening to continue into a initial quarter, afterwards urge in a second half of a year, presumption Democrats and Republicans strech a understanding on a debt roof and spending cuts.
“So distant we usually have one piece,” he pronounced of a mercantile precipice deal.
USE IT OR LOSE IT
Even if Washington politicians eventually solve their differences over mercantile issues, that is not approaching to entirely revive waste already caused to tech spending, experts said.
Technology projects that were axed during a finish of final year will not approaching be resumed any time shortly since annual tech budgets are allocated on a “use it or remove it” basis, according to experts who advise companies on record investments.
“These budgets are formed on how a business is doing during a time. All of these are postponable decisions,” pronounced Howard Anderson, a comparison techer during a MIT Sloan School of Management and visit confidant to arch investment officers during Fortune 500 companies.
Analysts pronounced that makers of hardware, from computers to networking gear, approaching missed out on a year-end check flush since businesses can postpone upgrades for years by shopping new program that is concordant with comparison equipment.
They pronounced they design some companies to have deferred a squeeze of new PCs in a fourth quarter, that could strike a formula of Windows and Office builder Microsoft, along with PC makers Dell and HP, as good as chipmakers Intel and Advanced Micro Devices Inc.
Nucleus Research researcher Rebecca Wettemann pronounced some businesses approaching behind shopping new PCs to equivocate carrying to ascent to Windows 8, that was introduced late final year.
“A new handling complement causes outrageous disruptions for businesses,” she said. “Who wants to take that on in a face of all a other uncertainty?”
Microsoft, Dell, HP and Intel declined to comment. AMD did not lapse requests for comment.
Beyond concerns about a U.S. economy, corporate IT buyers are also disturbed about a intensity for serve debility in Europe and Asia.
Last Thursday, Forrester cut a closely watched foresee for 2013 tellurian IT sales, citing a mercantile precipice disturbance as one reason. Forrester now expects tellurian IT sales to arise 3.3 percent to $2.2 trillion this year, down from a prior foresee for 4.3 percent growth.
Analysts contend a diseased economy might boost adoption of recently introduced information storage technologies that concede companies to put some-more information on a apparatus they already own, shortening a need for them to buy some-more hardware.
Some companies have already paid for that technology, though have nonetheless to exercise it since staff are not nonetheless gentle regulating it, pronounced researcher Cindy Shaw of investment investigate organisation Discern.
Shaw pronounced that executives during those companies are approaching to tell their IT staff to exercise that record to get full use out of existent apparatus before they can buy more.
Storage apparatus makers NetApp Inc and EMC, along with tough expostulate makers Western Digital Corp and Seagate Technology are approaching to humour a many from some-more use of a new technologies, that embody storage virtualization. NetApp and Western Digital declined to comment. EMC and Seagate could not be reached for comment.
Defenders of a tech attention contend a fallout from a mercantile precipice is already factored into share prices. The SP 500 Information Technology Index has climbed 1.6 percent over a past month, next a 4.0 percent boost in a broader SP 500 Index.
Some record companies seem staid to outperform a pack.
Oracle Corp pronounced on Dec 18 that it expects program sales expansion to stay clever in 2013 notwithstanding fears about a mercantile predicament [ID:nL1E8NIEZM]. The company’s gain kick Wall Street forecasts in a many new entertain as clever program sales equivalent a pointy dump in hardware revenue.
Analysts pronounced that IBM, whose entertain finished Dec 31, might have fared improved than other vast record companies, since it is has a vast volume of repeated income from a services and program divisions.
“Oracle and IBM both have super clever sales teams that can move home what they need to year after year,” pronounced Kim Forrest, comparison researcher of Fort Pitt Capital.
IBM and Oracle could not be reached for comment.
Article source: http://biz.thestar.com.my/news/story.asp?file=/2013/1/7/business/20130107150051&sec=business