Prudential Financial initiated coverage of the IT hardware sector with a market outperform rating, saying it expects a modest turnaround in information technology demand in the first two quarters of 2004, accelerating into 2005.
The brokerage firm initiated
with hold ratings.
were each given a buy rating.
Prudential sees large U.S. corporations rebounding first, followed by small- and medium-sized businesses, Europe, and the Asia-Pacific region six to nine months later. The firm also noted that IT productivity benefits should support spending at 1.5 times to two times the gross domestic product. Worldwide PC unit growth in 2003, 2004 and 2005 is expected to expand 5.6%, 9.3% and 10.4%, respectively.
Prudential expects open-systems technology to improve within the IT recovery, and said Dell is best positioned in this market. Business-process outsourcing is another trend that will increase, Prudential said. IBM is in the best spot in this area, with H-P coming in second.
Due to increased price sensitivity and resource integration, "we think long-term winners will need to be either solutions-focused or cost-focused, or both," Prudential concluded.
Among the top movers in the group, shares of Tech Data were up 6.2% at $30.95, while Sun Micro was down 2% at $4.99.