Discouraging signs for IT rebound

A new survey from investment firm Goldman Sachs shows businesses will remain frugal information technology buyers in 2003.

Businesses will remain frugal information technology buyers in 2003, according to a new survey published Thursday by investment firm Goldman Sachs.

The survey of 100 chief information officers at leading U.S. companies indicates that average business spending on computer hardware and software will decline by 1 percent this year compared with last year. Goldman Sachs conducted the survey in December, as most companies finalized their 2003 budgets.

The firm's previous IT outlook survey, conducted in October, indicated 2 percent to 3 percent growth in corporate computer purchasing in 2003. In a report issued Thursday, the company called the decline in sentiment "an unprecedented drop."

"Our latest results indicate a renewed determination among top management to control expenditures," the Goldman Sachs report stated.

The report said a lack of pent-up demand and new "game changing" technologies also contributed to the weakened outlook.

The data is an ominous sign for the embattled IT industry, which has suffered declining sales for more than two years. Pundits and executives had hoped 2003 would mark a return to growth, albeit modest, for an industry accustomed to rapid expansion.

Based on the latest Goldman Sachs survey, that's unlikely. The number of survey respondents that expect to put off higher IT spending until 2004 or later jumped from 26 percent to 43 percent.

The outlook for long-term growth in spending declined to 5 percent from 6 percent to 7 percent previously.

But the IT industry is getting mixed signals about its near future. Last month, software industry bellwether Oracle estimated flat to modestly higher sales in the company's third quarter, reversing six consecutive quarters of declining sales. Oracle's third quarter ends in February.

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