Wall Street Beat: Despite gov't cuts, tech spending overall shows signs of life

Some positive news from Apple, Facebook, as well as upbeat reports on software and tablet sales help fuel share prices

Though the shutdown and spending cuts by the U.S. government are taking a toll on IT sales this year, market surveys and financial results from the likes of Apple and Facebook this week show some positive signs for tech.

"In Forrester's semi-annual US tech market update, we conclude that the Federal budget sequestration, the two-week Federal government shutdown, and the fallout from threats to not raise the Federal debt ceiling have shaved about two percentage points of growth from business and government spending on technology goods and services in 2013," said Forrester chief economist Andrew Bartels in a blog post Sunday.

As a result, Forrester this week reduced its 2013 forecast for U.S. business and government purchases of ICT (information and communications technology) goods and services to 3.9 percent from its 5.7 percent growth forecast earlier this year.

The market research firm sees weakness in computer equipment, IT outsourcing and telecom services. Its revised forecast, however, continues to show strong growth in software, especially, SaaS (software as a service) and analytical and collaboration apps; IT consulting and systems integration services; and communications equipment.

For its part, IDC said this week that big data analytics, content applications and system software drove enterprise software growth in the first half of the year.

IDC said that for the first half of 2013, the worldwide software market grew 5.5 percent year over year, reaching a total market size of US$179 billion, which is close to the company's forecast of 5.7 percent growth for the full year. It's also slightly higher than 5.1 percent growth experienced in the first half of 2012, IDC pointed out, noting that this could be interpreted as a sign of recovery following a period of uncertainty caused by turmoil in the eurozone. IDC expects this moderately positive scenario to continue for several more years.

"Enterprises are seeing new opportunities to drive new and improved products and services by leveraging information. Therefore, it stands to reason that software to manage, access, and share information (structured and unstructured) continues to be a priority for competing in today's economy and a driver of software market growth," said IDC analyst Henry D. Morris in the report.

Tablets are another bright spot for IT. Both IDC and IHS this week issued reports showing strong growth in the market for the mobile devices. Worldwide tablet shipments grew to 47.6 million units in the third quarter of 2013, according to IDC. While slightly below the firm's forecast, the number still represents 7 percent growth over the previous quarter and a whopping 36.7 percent increase growth compared to the third quarter of 2012.

IHS put the sequential quarter increase in tablet shipments at 10 percent.

Android products once again drove much of the shipment growth in the market as iOS growth stalled and Windows tablets continued to struggle to win over consumers, IDC said. IHS data showed essentially the same trend.

"The erosion in Apple's unit shipment market share was inevitable," said Rhoda Alexander, director, tablet research for IHS. "Cheaper almost always wins the volume race, and competitors were quick to adjust pricing when it became clear that it was impossible to achieve anything close to Apple's unit growth at the same price level."

Apple on Monday reported that quarterly profit dropped despite higher sales of iPhones, as iPad sales flattened out and Mac sales slowed. Apple reported a profit of $7.5 billion for the fourth quarter of its fiscal year, down from $8.2 billion in the same quarter a year earlier. Revenue climbed to $37.5 billion for the quarter, up from $36 billion, beating analyst expectations for sales of $36.9 billion, according to Thomson Reuters. However, it was the third straight quarter of shrinking profit for the company.

For the current quarter, Apple said it expects revenue between $34 billion and $37 billion.

The decline in profit did not worry some analysts.

"We believe Apple's strong Q1/F14 guidance, after accounting for the incremental $900M in software deferral revenue, is consistent with our above-consensus estimate and expectations that a favorable iPhone and iPad mix shift should result in stronger holiday quarter ASPs [average selling prices] and margins versus consensus," said Canaccord Genuity analyst Michael Walkley.

The mobile sector also loomed as a big issue in the other attention-getting earnings announcement of the week, when Facebook Thursday said efforts to monetize its presence on mobile devices have been paying off.

Facebook said revenue was $2.02 billion, up 60 percent year over year. Sales from advertising amounted to $1.8 billion, up 66 percent from 2012's third quarter. Ads on mobile devices comprised about 49 percent of those sales. Net income for the quarter was $425 million, compared to a net loss of $59 million.

There has been enough positive news in tech earnings to help fuel share prices for the sector. The Nasdaq Computer Index of more than 130 tech companies on the exchange is up more than 22 percent for the year, with much of that growth coming over the last quarter.

Tags business issuesforresterAppleIDChardware systemsfinancial resultstabletsIHSFacebook

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Marc Ferranti

IDG News Service

Comments

Comments are now closed.

Latest News Articles

Most Popular Articles

Follow Us

GGG Evaluation Team

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell

LIFEBOOK UH574

The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi

STYLISTIC Q702

The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott

STYLISTIC Q702

My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Resources

Best Deals on GoodGearGuide

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?