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Tech and capital spending indices remain firm, but pricing
index falls again at a rapid rate
Taken in mid-July, our latest survey showed resiliency, with our total IT
spending index (including salaries, services, depreciation, occupancy, etc.)
essentially unchanged at 73.0 from 72.5 in our prior survey. This indicates
that survey respondents continue to expect 2011 IT spending to be above
2010 levels, and marks the second-highest index value since 2007. Also,
after reaching its highest level in four years at 72.5 in our June survey, our
tech capital spending index nudged down to 70.5. Our pricing index
notched down for the second consecutive survey to -0.29 (from -0.13 in
June), with the index now at the lowest level since early 2010 as pricing
was recovering, and showing declines at a rate not seen since 2008.
Trimming 2011 IT spend forecast, introducing initial 2012
with a lower growth bias as macro slows
After updating the many macro and micro inputs to our GS Technology
spending model, we are reducing our 2011 IT spending forecast to 5% yoy
from 6%. In addition, we introduce our initial 2012 IT spending forecast at
3%, which reflects our advanced economies and emerging markets
forecasts. We note that our 2012 IT spending growth forecast is 2% below
the Street’s revenue growth forecast for enterprise-facing tech companies,
reflecting our cautious stance. This is consistent with recent estimate
reductions across our TMT coverage.
Share gainers includes a mix of established and emerging
companies
AAPL once again ranked high as a share gainer in the PC segment of the
survey. DELL maintained its historically strong position among corporate
customers. IBM, CSCO, and DELL remained the clear share gainers in
enterprise servers. In storage, NTAP regained its market share momentum,
ranking as the number one share gainer. Given the nascent, ongoing
migration to cloud computing, VMW topped the list of spend gainers in
Software. In Communications Equipment, RVBD moved up to the largest
share gainer on an absolute basis in this survey followed by ARUN. CSCO
remained among the top-three share gainers for the 15th consecutive
survey on an absolute basis.
Summary: Indices flat, but some caution emerges; trimming 2011
forecast, and introducing initial 2012 view
Our total IT spending index stays flat, capital spending index drops modestly, but
both remain firmly at expansion levels
Our total IT spending index (including salaries, services, depreciation, occupancy, etc.) was
essentially unchanged at 73.0 in our August 2011 survey from 72.5 in our prior survey. This
indicates that survey respondents continue to expect 2011 IT spending to be above 2010
levels, and marks the second-highest index value since 2007. Also, after reaching its
highest level in four years at 72.5 in our June 2011 survey, our tech capital spending index
nudged down to 70.5.
Pricing index contracts again, with a drop not seen since 2008
Our pricing index notched down for the second consecutive survey to -0.29 (from -0.13 in
our June survey), with the index now down to the lowest level since early 2010 as pricing
was recovering. While the recent declines are not enough to identify a definitive trend, we
believe that it is noteworthy that we have not seen price declines of this magnitude since
2008, when we previously saw the pricing index drop with a similar velocity.
2H2011 spending expectations reflect a more cautious stance
Although our total IT tech and capital spending indices did not show a major inflection
point and both remain firmly in expansion mode, the responses we collected regarding
2H2011 spending intentions suggest some moderation in spending expectations. In
addition, the number of respondents that now expect a more muted seasonal IT spending
environment jumped significantly, reflecting a more cautious stance to the 2H2011
spending backdrop. Taken as a whole, our data suggests that 2011 should largely reflect
normal seasonal IT spending patterns (i.e., higher spending in the back half of the year),
though the relative expectations from our panel for an acceleration appear more tempered.
Trimming our 2011 IT spending growth forecast to 5%
After updating the many macro and micro inputs to our GS Technology spending index,
we are reducing our 2011 IT spending forecast to 5% yoy from 6%. The key driver to our
updated 2011 view was a reduction in developed markets IT spending, reflecting growing
concerns domestically and in Europe. We also slightly reduced our emerging markets IT
spending estimate. Our 5% spending forecast remains 2 percentage points above the
Street’s growth expectation for S&P 500 enterprise-facing tech companies, which now
stands at 3% for 2011.
Introducing initial 2012 spending forecast at 3%
We establish our initial 2012 IT spending forecast at 3%, which reflects our advanced
economies and emerging markets forecasts of 2% and 9%, respectively. Our 2012 IT
spending growth forecast is 2 percentage points below the Street’s revenue growth
forecast for enterprise-facing tech companies (5%), reflecting our increasingly cautious
view and consistent with a series of estimate and price target introductions rolled our by
our TMT team over the last few weeks.
Share gainers: AAPL, DELL, IBM, CSCO, NTAP, VMW, RVBD, and ARUN
AAPL once again ranked high as a share gainer in the PC segment of the survey, which
could be an early indication that CIO sentiment is warming up to Macs (though this tends
to occur very gradually). DELL maintained its historically strong position among corporate
customers. IBM, CSCO, and DELL remained the clear share gainers in enterprise servers.
In storage, NTAP regained its market share momentum, ranking as the number one share
gainer. Given the nascent, ongoing migration to cloud computing, VMW topped the list of
spend gainers in Software. In Communications Equipment, RVBD moved up to the largest
share gainer on an absolute basis this survey, followed by ARUN. CSCO remained among
the top-three share gainers for the 15th consecutive survey on an absolute basis.
Subsector takeaways
Cloud computing and data services – (1) Cloud adoption is rising, and the tail may be
longer than previously anticipated. Respondents clearly anticipate moving more into
the cloud, with nearly 80% expecting to use external cloud vendors in the next two
years. Notably, responses indicate that enterprises utilize multiple Cloud vendors,
suggesting a best-of-breed approach. (2) We see increased traction from those
companies opting to move cloud deployments beyond in-house data centers.
Communications equipment – Demand trends are stable; ARUN and RVBD emerge
again as secular winners in the survey results, while BRCD and RIMM are most
challenged. (1) There has been relatively stable demand for network equipment. (2)
Our CIO respondents expect that wide area network (WAN) optimization, Wireless
Networking and Network Security will be beneficiaries in the move to private and
public Clouds. (3) Market share in enterprise data networking continues to shift away
from Cisco toward Juniper, HP, and others. (4) More CIOs are planning to purchase or
develop applications for the iPhone or Android than for BlackBerry.
Hardware – (1) Corporate PC demand is showing signs of slowing. (2) Industry
Standard Server (ISS) spending further dampened. (3) Networked storage: EMC
continues to widen its strong lead in virtualized environments. (4) Enterprise interest in
tablet adoption remains high.
Services – (1) Discretionary spend is strong into 220H11, but risks are increasing for
2012. (2) Priority spend is on infrastructure and application development, while
outsourcing trails.
Software – (1) Cloud vendors continue to be top of mind with CIOs. (2) Oracle’s
monetization of Sun maintenance continues. (3) Red Hat’s RHEL 6 product offering
could provide a buffer through a potential downturn.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Tech and capital spending indices remain firm, but pricing
index falls again at a rapid rate
Taken in mid-July, our latest survey showed resiliency, with our total IT
spending index (including salaries, services, depreciation, occupancy, etc.)
essentially unchanged at 73.0 from 72.5 in our prior survey. This indicates
that survey respondents continue to expect 2011 IT spending to be above
2010 levels, and marks the second-highest index value since 2007. Also,
after reaching its highest level in four years at 72.5 in our June survey, our
tech capital spending index nudged down to 70.5. Our pricing index
notched down for the second consecutive survey to -0.29 (from -0.13 in
June), with the index now at the lowest level since early 2010 as pricing
was recovering, and showing declines at a rate not seen since 2008.
Trimming 2011 IT spend forecast, introducing initial 2012
with a lower growth bias as macro slows
After updating the many macro and micro inputs to our GS Technology
spending model, we are reducing our 2011 IT spending forecast to 5% yoy
from 6%. In addition, we introduce our initial 2012 IT spending forecast at
3%, which reflects our advanced economies and emerging markets
forecasts. We note that our 2012 IT spending growth forecast is 2% below
the Street’s revenue growth forecast for enterprise-facing tech companies,
reflecting our cautious stance. This is consistent with recent estimate
reductions across our TMT coverage.
Share gainers includes a mix of established and emerging
companies
AAPL once again ranked high as a share gainer in the PC segment of the
survey. DELL maintained its historically strong position among corporate
customers. IBM, CSCO, and DELL remained the clear share gainers in
enterprise servers. In storage, NTAP regained its market share momentum,
ranking as the number one share gainer. Given the nascent, ongoing
migration to cloud computing, VMW topped the list of spend gainers in
Software. In Communications Equipment, RVBD moved up to the largest
share gainer on an absolute basis in this survey followed by ARUN. CSCO
remained among the top-three share gainers for the 15th consecutive
survey on an absolute basis.
Summary: Indices flat, but some caution emerges; trimming 2011
forecast, and introducing initial 2012 view
Our total IT spending index stays flat, capital spending index drops modestly, but
both remain firmly at expansion levels
Our total IT spending index (including salaries, services, depreciation, occupancy, etc.) was
essentially unchanged at 73.0 in our August 2011 survey from 72.5 in our prior survey. This
indicates that survey respondents continue to expect 2011 IT spending to be above 2010
levels, and marks the second-highest index value since 2007. Also, after reaching its
highest level in four years at 72.5 in our June 2011 survey, our tech capital spending index
nudged down to 70.5.
Pricing index contracts again, with a drop not seen since 2008
Our pricing index notched down for the second consecutive survey to -0.29 (from -0.13 in
our June survey), with the index now down to the lowest level since early 2010 as pricing
was recovering. While the recent declines are not enough to identify a definitive trend, we
believe that it is noteworthy that we have not seen price declines of this magnitude since
2008, when we previously saw the pricing index drop with a similar velocity.
2H2011 spending expectations reflect a more cautious stance
Although our total IT tech and capital spending indices did not show a major inflection
point and both remain firmly in expansion mode, the responses we collected regarding
2H2011 spending intentions suggest some moderation in spending expectations. In
addition, the number of respondents that now expect a more muted seasonal IT spending
environment jumped significantly, reflecting a more cautious stance to the 2H2011
spending backdrop. Taken as a whole, our data suggests that 2011 should largely reflect
normal seasonal IT spending patterns (i.e., higher spending in the back half of the year),
though the relative expectations from our panel for an acceleration appear more tempered.
Trimming our 2011 IT spending growth forecast to 5%
After updating the many macro and micro inputs to our GS Technology spending index,
we are reducing our 2011 IT spending forecast to 5% yoy from 6%. The key driver to our
updated 2011 view was a reduction in developed markets IT spending, reflecting growing
concerns domestically and in Europe. We also slightly reduced our emerging markets IT
spending estimate. Our 5% spending forecast remains 2 percentage points above the
Street’s growth expectation for S&P 500 enterprise-facing tech companies, which now
stands at 3% for 2011.
Introducing initial 2012 spending forecast at 3%
We establish our initial 2012 IT spending forecast at 3%, which reflects our advanced
economies and emerging markets forecasts of 2% and 9%, respectively. Our 2012 IT
spending growth forecast is 2 percentage points below the Street’s revenue growth
forecast for enterprise-facing tech companies (5%), reflecting our increasingly cautious
view and consistent with a series of estimate and price target introductions rolled our by
our TMT team over the last few weeks.
Share gainers: AAPL, DELL, IBM, CSCO, NTAP, VMW, RVBD, and ARUN
AAPL once again ranked high as a share gainer in the PC segment of the survey, which
could be an early indication that CIO sentiment is warming up to Macs (though this tends
to occur very gradually). DELL maintained its historically strong position among corporate
customers. IBM, CSCO, and DELL remained the clear share gainers in enterprise servers.
In storage, NTAP regained its market share momentum, ranking as the number one share
gainer. Given the nascent, ongoing migration to cloud computing, VMW topped the list of
spend gainers in Software. In Communications Equipment, RVBD moved up to the largest
share gainer on an absolute basis this survey, followed by ARUN. CSCO remained among
the top-three share gainers for the 15th consecutive survey on an absolute basis.
Subsector takeaways
Cloud computing and data services – (1) Cloud adoption is rising, and the tail may be
longer than previously anticipated. Respondents clearly anticipate moving more into
the cloud, with nearly 80% expecting to use external cloud vendors in the next two
years. Notably, responses indicate that enterprises utilize multiple Cloud vendors,
suggesting a best-of-breed approach. (2) We see increased traction from those
companies opting to move cloud deployments beyond in-house data centers.
Communications equipment – Demand trends are stable; ARUN and RVBD emerge
again as secular winners in the survey results, while BRCD and RIMM are most
challenged. (1) There has been relatively stable demand for network equipment. (2)
Our CIO respondents expect that wide area network (WAN) optimization, Wireless
Networking and Network Security will be beneficiaries in the move to private and
public Clouds. (3) Market share in enterprise data networking continues to shift away
from Cisco toward Juniper, HP, and others. (4) More CIOs are planning to purchase or
develop applications for the iPhone or Android than for BlackBerry.
Hardware – (1) Corporate PC demand is showing signs of slowing. (2) Industry
Standard Server (ISS) spending further dampened. (3) Networked storage: EMC
continues to widen its strong lead in virtualized environments. (4) Enterprise interest in
tablet adoption remains high.
Services – (1) Discretionary spend is strong into 220H11, but risks are increasing for
2012. (2) Priority spend is on infrastructure and application development, while
outsourcing trails.
Software – (1) Cloud vendors continue to be top of mind with CIOs. (2) Oracle’s
monetization of Sun maintenance continues. (3) Red Hat’s RHEL 6 product offering
could provide a buffer through a potential downturn.
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