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Survey finds little sign of IT rebound

Information technology spending has stabilized, but talk of general improvement for the rest of the year is premature, according to a new survey from Goldman Sachs.

Information technology spending has stabilized at the start of 2003, but talk of general improvement for the rest of the year is premature, according to a new survey from Goldman Sachs.

The survey of 100 chief information officers at leading U.S. companies shows that--at about 1 percent growth--the average outlook for IT spending in 2003 remains essentially flat. Although the figure indicates a slight bounce from bleaker findings in the company's December survey, which pointed to an average 1 percent decline in spending for the year, the latest results are below the predictions of 2 percent to 3 percent average growth in last fall's survey.

"The persistently weak fundamental environment tempers hope of pent-up demand emerging from a resolution of geopolitical tensions," according to the survey released Tuesday. "Over 70 percent of our IT managers believe that incremental budget tightening by management is more likely than budget loosening over the next 3 to 6 months."

Geopolitical worries have centered on the Persian Gulf region. Executives such as Hector Ruiz, CEO of Advanced Micro Devices, and Meg Whitman, CEO of eBay, have cautioned that fears about war in Iraq appear to have put a crimp in corporate and consumer spending.

The data from investment firm Goldman Sachs is another blow to an embattled IT industry, which has been mired in a sales slump for more than two years. The industry had hoped that 2003 would mark the turning point with the return of demand for hardware and software. That may have been wishful thinking, according to the results of this survey.

There is some positive news for certain technology companies. Surveyed CIOs said that they are allocating more of their IT budgets on products from Dell Computers and IBM while reducing the amount spent on Sun Microsystems and Hewlett-Packard.

"Our survey results agree with our fundamental views that Dell and IBM continue to be the best-positioned enterprise systems vendors in the current environment," the report said.

Dell and IBM also made similar gains as storage providers. EMC remained at the top but lacked momentum.

"Results for EMC, the perennial top share-gainer in our storage survey, were essentially neutral in our latest survey, surprising in light of strong feedback around its latest core product upgrades," according to the report.

Linux continued to gain momentum, with 53 percent of those surveyed now implementing the open-source variation of the Unix operating system. Similar to the October survey, another 39 percent said they plan to use Linux in the next year.

Reuters contributed to this report.