Wall Street Beat: IT forecasts slashed

With CIOs reporting budget revisions, market analysts slashing expectations for tech sector growth, and companies as diverse as Yahoo, Hynix, Texas Instruments and Sony cutting sales forecasts and jobs this week, there is no bottom clearly in sight for IT.

Along with a global slowdown, the U.S. recession is having an effect on technology that is much more profound than what was expected several months ago.

"Our most recent industry checks point to 2009 IT budgets down 10 percent to 20 percent, marking a rapid deterioration from our proprietary survey of 200 CIOs in Sept. '08, which indicated weak 1 percent growth," Citibank said in a report on IT buyers in financial services. Buyers who currently have a grip on how their budgets are shaping up are typically in the financial services arena, Citibank noted in the report, issued Thursday.

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With CIOs reporting budget revisions, market analysts slashing expectations for tech sector growth, and companies as diverse as Yahoo, Hynix, Texas Instruments and Sony cutting sales forecasts and jobs this week, there is no bottom clearly in sight for IT.

Along with a global slowdown, the U.S. recession is having an effect on technology that is much more profound than what was expected several months ago.

"Our most recent industry checks point to 2009 IT budgets down 10 percent to 20 percent, marking a rapid deterioration from our proprietary survey of 200 CIOs in Sept. '08, which indicated weak 1 percent growth," Citibank said in a report on IT buyers in financial services. Buyers who currently have a grip on how their budgets are shaping up are typically in the financial services arena, Citibank noted in the report, issued Thursday.

Buyers who are not in financial services "have unusually low visibility" into what they'll be able to spend in the first quarter, Citibank noted. "IT buyers we spoke with may defer spending until 2H '09 to protect against further budget cuts," Citibank said.

With the first half of next year looking bleak, Forrester Research on Tuesday revised its 2009 U.S. IT spending forecast down to 1.6 percent annual growth, from its prior projection of 6.1 percent growth.

"Our U.S. tech market forecast now assumes that the ... decline in U.S. real GDP (gross domestic product) in Q3 2008 will accelerate in Q4 2008 and the first half of 2009 before a weak recovery starts in the second half," said Forrester Research Vice President Andrew Bartels in the report.

With forecasts for a positive outcome for next year getting razor-thin, even bright spots like software are dimming. Gartner forecasts that worldwide spending on enterprise software will reach US$244 billion in 2009, down from its prediction of $253 billion made in September, before the collapse of the U.S. investment banking industry.

Bracing for continued tough times, tech and consumer electronics companies around the world announced layoffs this week. Yahoo said Wednesday it is laying off about 1,500 employees, enacting a previously announced plan to cut 10 percent of its staff. Sony said Tuesday it will cut 8,000 jobs, close factories and cut electronics investment by almost 30 percent.

The hardware and components sectors of IT are getting hit the hardest, as PC purchases are typically the first thing cut when tech budgets are constrained. Several large chip manufacturers cut their forecasts this week.

Korea's Hynix, which in terms of revenue is the world's second-biggest memory chip maker after Samsung, said at the start of the week that it will cut the number of its executives by 30 percent, reduce chief executive pay by 30 percent and cut pay for other executives by 10 percent to 20 percent.

Texas Instruments cut its profit forecast for the current quarter, announcing Monday that it will report earnings of between $0.10 per share and $0.16, compared to an earlier estimate of $0.30 to $0.36.

The IDG News Service is a Network World affiliate.