Financial Services colossus Morgan Stanley reckons on-premises hardware vendors are about to have their best sales season for a decade.
The firm popped out a research note on Monday February 26th in which head of North American Technology Hardware Equity Research Katy L. Huberty said that while "every $1 of revenue growth for the largest cloud service has resulted in about $3 of revenue decline for the major legacy technology companies … several catalysts are converging to give IT Hardware a second life-and drive double-digit earnings growth in 2018."
Huberty wrote that slow growth in enterprise hardware sales has been caused by businesses adopting cloud, but not because they've stopped buying on-premises kit forever. Instead, "enterprises have been putting IT Hardware spending on hold while they grapple with decisions around how, when and how much of their workloads to move to the cloud."
Those decisions have now been made, she wrote. "With plans now coming into focus, companies are ready to make necessary upgrades to their IT Hardware."
"The outlook for IT Hardware is further bolstered by a weaker U.S. dollar, declining memory prices and improving revenue scale," Huberty wrote, adding "This adds up to an average 60 basis point gross margin expansion for the group, the largest improvement since the initial recovery out of the recession."
Enthusiasm for artificial intelligence and the internet of things will help, too, by creating demand for new data center kit. That's in contrast to the last couple of IT spending sprees that were driven by consumers.
The firm's therefore given IT hardware vendors "a double upgrade … from cautious to attractive." ®