Computer spending less than expected

By Peter J. Brennan
Bloomberg News Service

LAKE BUENA VISTA, Fla. — Worldwide spending on computer-related technology will rise less than expected this year and in 2003 as companies reduce purchases of services and telecommunications gear, Dataquest Inc. said.

Spending will rise 3.4 percent in 2002 to $2.3 trillion, compared with Dataquest's forecast in May that called for a 7.6 percent rise, said George Shiffler, an analyst for Dataquest.

"There's a lot of downside risk to that (the new forecast)," Shiffler said. "The economic situation has lasted a lot longer than people thought and the effect on IT spending has been pretty marked."

In 2003 sales will rise 7 percent to $2.46 trillion, down from a previous forecast of 9.3 percent growth, Shiffler said. A larger rebound probably won't occur until the second quarter of next year, he said. Investors have been waiting for improvement in spending, which declined 0.4 percent in 2001, Dataquest said.

A rebound should follow about six months after the economy begins picking up and business executives become more confident, said Roger Fulton, a Dataquest analyst.

"They'll want to review their proposed purchases to make sure they are doing the right thing," Fulton said. "A lot of projects have been on hold. When the brakes get let off, people will still have to do due diligence."

Dataquest, a market-research firm, is a unit of Gartner Inc., which is hosting a symposium this week in Lake Buena Vista, Fla.

Telecommunications spending will rise 4.8 percent to $1.34 trillion this year and 7.5 percent to $1.45 trillion next year, as spending is driven by services for fixed-line and mobile markets, Dataquest said.

Spending for services will increase 2.8 percent to $557.5 billion this year and will rise 7.1 percent next year to $597.1 billion, Dataquest said.

Outsourcing of computer-related services is growing because companies are reducing costs, Dataquest said. Other segments of services, such as consulting and systems integration, are easier for companies to delay or drop in a weak economy.

Sales of hardware, such as personal computers, printers, servers and handheld computers, will fall 1.3 percent this year to $323.3 billion and rise 4.8 percent to $338.8 billion next year, said Dataquest.

PCs will lead hardware sales next year as servers, especially those for Unix-based systems, will face more competition, Dataquest said. Companies are unwilling to spend on newer technologies such as handheld computers, which will perform below expectations, Dataquest said.

Software purchases will increase 3.6 percent to $76.9 billion this year and 6.5 percent next year to $81.8 billion. Software sales will be led by companies seeking to improve their computer systems, Fulton said.

Telecommunications is the largest segment of worldwide spending on so-called information technology, with 58 percent of sales this year, followed by services at 24 percent, hardware at 14 percent, and software, 3.3 percent.