A trio of surveys released Monday point to continued improvement in spending for hardware, software and semiconductors throughout 2004. Despite roundly upbeat findings, the separate surveys from Goldman Sachs, Merrill Lynch and market research firm IDC were having little positive impact on tech shares Monday. The Nasdaq 100 was recently down 1.3%, while the Merrill Lynch Tech 100 was off 1.5% and the Philadelphia Stock Exchange Semiconductor Index was down 2.5%. Goldman Sachs' latest bimonthly survey of 100 chief information officers found that the CIOs are more bullish about spending on information technology than they've been in more than two years. "Importantly, this is beginning to translate into higher IT budget forecasts," said Goldman technology analyst Laura Conigliaro. Long-term spending targets, Goldman found, are also rising, now approaching 6%, "a level far more normal than the depressed forecasts we saw over the last two years." Significantly, the manufacturing sector, which accounts for about 14% of the demand for technology products, is raising capital expenditures, with Goldman forecasting 16% growth in capex this year, vs. a 13% decline in 2003. Other sectors, including financials and communications, also reported growth in capex. Asked which enterprise server and systems providers "are gaining share of your IT spending dollars," the CIOs listed (in order) Dell ( DELL), Hewlett-Packard ( HPQ) and IBM ( IBM). "Dell's strength probably also stems from its high association with Linux among our IT users
while H-P is undoubtedly benefiting from similar trends, as well as its broad based set of server product offerings," Conigliaro wrote. Sun Microsystems ( SUNW) was the biggest loser, according to the survey. "Although the majority of our IT users who are Sun customers plan to replace their existing Sun servers with new ones from Sun, and Sun's Solaris operating system scored high with its customers, Sun's core SPARC-based servers fared poorly compared with AMD- and Intel-based choices, highlighting the mix and margin issues that Sun is facing," the Goldman survey said.
Separately, IDC predicted the market for PC semiconductors will grow 18% in 2004 to a total of $53.6 billion. If the forecast pans out, 2004 is likely to be the peak growth year in the current chip cycle. Shane Rau, IDC's lead PC semiconductor analyst, projected the sector's recovery "will hit its stride in 2004, specifically in the second half of the year." He said trends to watch include still-growing demand for mobile computing and wireless connectivity, as well as increasing overlap between the consumer and PC markets. So far, chip revenue growth has been spurred by increased volume sales of chips and by consumers. It remains to be seen whether 2004 could see a rise in chip prices, as well as increased spending by big companies, both factors that could fuel further upside for the market. Rau said IDC's forecast assumes some increase in corporate demand. Last week, chip giant Intel
downplayed the potential for any abrupt upturn in enterprise spending, with CFO Andy Bryant predicting the market will see a "slow, steady upgrade cycle taking place over a period of time." In Merrill Lynch's software-oriented survey of 50 CIOs, "the key takeaways were stabilization in the software-spending environment and healthy expectations for an improvement in fundamentals for 2004." Security, business intelligence, document management, application integration and customer relationship management (CRM) applications were highlighted as top spending priorities for 2004, Merrill found. Although only 50% of the CIOs surveyed by Merrill said they planned to increase Linux usage in 2004, "it's important to note that nearly half our survey included midsized companies where Linux penetration is not as great," Maynard wrote. Staff reporter K.C. Swanson contributed to this story.