In recent weeks, Lehman Brothers and Merrill Lynch analysts have gone to the techies in their IT departments and asked where the market is headed. How's that Microsoft rollout? What kind of routers are you buying these days? Servers? Storage?
Armed with this information, these analysts are holding conference calls and issuing research reports detailing anecdotal evidence for investors. Of course, none of these IT powwows could escape shameless plugs for the brokerage firms. Lehman Brothers had to tell clients that it was "one of the few financial firms on the Street growing considerably," while Merrill Lynch dutifully noted it was on the "leading edge" of technology.
On a recent Lehman Brothers conference call with clients, the firm's Microsoft analyst Michael Stanek gathered folks to cut through the hype about Microsoft's Windows 2000, .Net strategy and Exchange Server 2000. Why should we listen to Lehman's IT department?
Well, the IT staff is "quite good," said Stanek, who runs the conference call as an annual event.
The call was designed to illustrate "Lehman's past, current and future relationship with Microsoft in the hopes to provide investors an unbiased view of Microsoft products and their efforts for penetration into the enterprise."
For the most part, Lehman's IT crew delivered. Big takeaways from Lehman's techies are that upgrades to Windows 2000 aren't easy (Lehman runs Windows NT and Windows 2000 on parallel networks), Microsoft's Exchange 2000 server is a big deal, and the company's .Net strategy could use a little clarification. "I'm still trying to figure out what .Net is," quipped one Lehman techie, who said he liked Microsoft overall. "It's a big beast."
Not to be outdone, Merrill Lynch tech strategist Steven Milunovich published a wide-ranging interview with David Yeger, chief IT architect for Merrill Lynch's Private Client business.
Yeger--referred to as "David" in Milunovich's report--had some interesting points. According to Milunovich, Yeger saw IT spending loosening up in the second half, and demand for wireless applications such as voice portals and storage growing. PC demand should improve with the Windows 2000 and XP upgrade cycle, he said.
According to Milunovich, Yeger oversees 35,000 desktops, 6,000 servers, 15 mainframes, and their associated storage. Like Lehman's panel of IT folks, Yeger is also a Microsoft fan.
Other points to ponder from Yeger:
Merrill Lynch's IT budget will be down 3 percent from an original plan of up 8 percent. Spending is frozen. The good news is Merrill Lynch is benefiting from a price war. PC costs are down 10 percent to 15 percent from a year ago, server prices are off 10 percent and storage costs are down 30 percent to 40 percent. "Attractive software deals can be had given the low variable costs involved," Milunovich said.
At Merrill, customer-relationship management software and wireless applications are intertwined. Wireless applications will be hot, according to Yeger, who believes that no one wants to surf the Net via phone. That means voice portals will do well, and speech-recognition software is getting close to prime time.
Yeger is big on storage and sees EMC and Hitachi doing well. At the low end of the market, Dell Computer and Compaq Computer do a decent job of competing. Yeger sees Microsoft gaining share in corporations and expects Sun Microsystems to feel the heat.
PC demand will improve next year, three years after the tech sector's 1999 spending binge. At Merrill, PCs are upgraded every 18 months to 24 months. All that talk about thin clients is a myth, according to Yeger.
That's interesting stuff. Luckily, Milunovich didn't have to go far to get it.