This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Tech to Weather Fed Spending Cuts

NEW YORK, ( TheStreet) -- The Super Committee may be gridlocked on how to shave more than $1.2 trillion off the U.S. deficit over the next 10 years, but experts and CEOs are confident that Silicon Valley can weather the inevitable cuts in federal spending.

Still, though, big dollar-shaped clouds are gathering over the Capitol. The Budget Control Act which created the Super Committee, for example, caps "discretionary" federal spending at $1.043 trillion in 2012, compared to $1.376 trillion in 2011.

Tech should weather much of the federal spending cuts, say experts.

"Certainly, on aggregate, federal spending is going to be coming down over the next several years but our view is that the tech sector will be somewhat insulated from the cuts," said Kevin Plexico, vice president of federal information solutions at Deltek. "Not that it's going to plow ahead with a strong growth rate, but our view is that it will be a relatively flat market."

IT tends to be less impacted by cuts in discretionary spending, according to Plexico, because agencies need to keep their technology operations up and running, regardless of the economic climate. Additionally, he said, government will still spend big bucks on key technologies such as health care IT and cyber security.

Symantec (SYMC - Get Report), which recently posted record second-quarter results, said that cyber security is now a major priority for governments, both in the U.S. and overseas. Speaking during the company's second-quarter conference call, Symantec CEO Enrique Salem, citing conversations with "senior folks" in government, predicted 2012 federal IT spending between $76 billion and $80 billion.

According to data from the Office of Management and Budget, federal IT spending was around $79 billion in 2011. The Government Accountability Office, however, said the actual figure is likely higher.

Nonetheless, Symantec remains confident of its ability to win government business. "I still expect cyber security to be a very significant budget," explained Salem, during the conference call. "I haven't seen dramatic changes in that area."

In health care, the Obama administration's ambitious plan to deploy electronic medical records continues, music to the ears of a host of companies, including McKesson (MCK), GE Healthcare (GE), Cerner (CERN) and IBM (IBM - Get Report).

"I don't know if the overall spending environment is healthy or not, but security is definitely going up, health care is going up," said Chip Gliedman, principal analyst at Forrester Research. Agencies, he added, are also under pressure to improve their online interactions with the public.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
CSCO $27.13 0.15%
HPQ $31.49 -1.62%
IBM $160.40 -0.12%
MSFT $40.97 -0.58%
SWI $50.55 0.56%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs