Goldman Sachs issues gloomy IT spending outlook

No belt loosening in 2003

Pre-Christmas gloom amongst IT managers means technology spending is likely to decline this year, instead of growing, according to research released by investment bank Goldman Sachs yesterday.

The bank said that average outlook was for a 1% decline in IT spending this year, compared to the 2% to 3% growth predicted as recently as October. Goldman Sachs said it was "surprised by the magnitude of the decline". Budgeting for 2003 probably was concluded ahead of the survey, it said, and "our results indicate a renewed determination among top management to control expenditures."

Two thirds of respondents said they expected incremental budget tightening rather than loosening heading into early 2003. While 36% said they thought pricing was stable, 56% said they saw discounting on the rise. Goldman Sachs found 15% of respondents expected spending to accelerate before the second half of the year, compared to 28% in October, while the proportion of IT managers expecting acceleration to not occur till next year or later jumped from 26% to 43%.

While analysts expect enterprise facing tech companies to show flat to up sequential revenues in the first quarter, Goldman Sachs said "seasonality in the March quarter is likely to be more severe than current estimates appear to suggest." The bank also said that the expectation for full year revenues to be up 7% is "overly optimistic."

© ComputerWire