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Year-end surge to lift IT spending

A last-minute shopping spree as IT buyers scrape out their budgets will push computer technology spending beyond 2001 levels, predicts research firm IDC.

A surge in computer technology purchases in the fourth quarter will help push information technology spending in 2002 beyond 2001 levels, predicts one market research firm.

Compared to 2001, overall IT spending in 2002 will increase 3.7 percent to $981 billion, while 2003 spending will grow 9 percent to exceed $1 trillion for the first time, IDC said Wednesday. IT spending includes purchases of servers, desktop machines, storage products, software, services and other computer technology.

The growth will be clearest in the fourth quarter, traditionally the quarter with the most purchasing activity, when companies try to spend all the budget money allocated for that year. Fourth-quarter spending in 2001 was severely curtailed after the Sept. 11 terrorist attacks, so the comparison to 2002 should be unusually strong, IDC said.

"The uptick will become more evident" in the fourth quarter, said Stephen Minton, IDC's program director of worldwide IT markets research. "The bottom has already been reached. The green shoots of recovery will begin to emerge gradually during (the third quarter), and (the fourth quarter) will show strong year-on-year comparisons with 2001."

Computing companies have been struggling through a prolonged spending drought. Customers tightened their purse strings after buying excess computing capacity in the heady Internet years, when firms such as IDC predicted much faster growth, and a recession cut IT spending further.

Though a recovery is expected, not all sectors of the computing industry will benefit, IDC said. Computer hardware spending is expected to decline 4 percent in 2002 compared to 2001, though IDC predicts it will recover and grow 5 percent in 2003.

The United States remains the largest IT market. This year, IDC expects the U.S. companies to spend $436 billion on IT purchases--a 3 percent increase over last year. It predicts the U.S. market will grow 9 percent in 2003.

Western Europe IT spending should increase 4 percent in 2002 and 6 percent the following year. Japan, meanwhile, will have level spending this year but a 7 percent increase in 2003. Faster growth will take place in China, India, Korea, Russia, the Philippines, South Africa and Poland, IDC said.

Federal spending by the United States government, however, continues to be cautious. The Office of Management Budget, which oversees federal IT spending for the executive branch, sent a memo to U.S. government agency heads this past Friday freezing "all IT infrastructure system development and planned modernization efforts" above $500,000.

The move is intended to see if savings can achieved through the centralization of divisions into the Homeland Security Department, according to a research note from Chuck Phillips, an analyst at Morgan Stanley.