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), 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).

"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.

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