Wall Street Beat: Intel, IT Forecasts Stoke Expectations

Today's Best Tech Deals

Picked by PCWorld's Editors

Top Deals On Great Products

Picked by Techconnect's Editors

Intel's earnings highlighted another upbeat week for the tech sector, as fresh market-research reports on PC sales and overall IT spending fueled confidence that global demand for IT, as well as vendor revenue, is poised to take off.

Boosted by predictions that IT will lead the global economy out of recession, the Nasdaq, heavily weighted with IT vendors, has for weeks remained at levels not seen since Wall Street started to collapse in September 2008.

The exchange hit a 52-week high last Friday, then retreated a bit along with broader indexes on continued concerns about unemployment, new taxes and regulations on the U.S. financial community. But the investor and analyst mood on tech remains optimistic.

Intel added to the upbeat sentiment when it reported Thursday that its 2009 fourth-quarter revenue rose to US$10.6 billion from $8.2 billion a year earlier. Profit was $2.28 billion, or $0.40 a share, compared with a profit of $234 million and $0.04 a share a year earlier. The 875 percent jump in profit came about partly because Intel earnings a year earlier were dampened by the company's almost $1 billion in investments in Clearwire. Still, the Intel numbers handily beat expectations.

The high side of Intel's projection for the current quarter also beat analyst forecasts. Intel said it expects revenue of $9.7 billion, plus or minus $400 million. Analysts currently project sales of $9.35 billion, according to Thomson Reuters.

The Intel results followed reports from Gartner and IDC that worldwide PC shipments jumped during the last three months of 2009, as low prices enticed consumers and businesses that had been delaying purchases during the turbulent economic times of the past year. Shipments totaled 85.8 million units during the fourth quarter, growing 15.2 percent compared to the same period in 2008, IDC said Wednesday. Gartner results were similar, and both market-research companies noted an increased demand for laptops and netbooks.

"The technology downturn of 2008 and 2009 is unofficially over," wrote Forrester analyst Andrew Bartels in a new IT spending forecast released Tuesday. After declining 8.2 percent in 2009, U.S. IT spending will increase by 6.6 percent this year, to $568 billion, Forrester said. Global IT spending, after dropping 8.9 percent last year, will rise 8.1 percent to more than $1.6 trillion, according to Forrester.

These increases will still not bring spending in line with 2008 levels, Bartels said in an interview. However, Forrester sees this year as the beginning of a new cycle where IT spending will grow at rates approaching those of the past decade.

"We see a new cycle of innovation and growth similar to the 1992-2000 period," Bartels said. As in that period, tech sector growth could be twice that of gross domestic product, which through 2012 could be as much as 5 percent or 6 percent on the upside, Bartels noted. This means tech sector growth could hit possibly double digits over the next few years.

The new cycle for tech is based on the adoption of "smart computing," Bartels said, with businesses and governments starting to make big investments in leading-edge technologies such as analytics, as well as service-oriented architecture, server and storage virtualization, and unified communications.

Demand for these technologies started to ignite above-average tech market growth in the U.S. in late 2007 and early 2008, before the collapse of credit markets, Bartels noted. "As financial markets recover and the freeze on capital investment thaws, we expect that deferred demand will come back in 2010, especially in the second half of the year," Bartels said.

The financial sector itself will help boost demand, according to Celent, a financial research and consulting firm. After a 2.5 percent decline in 2009, global IT spending by financial services institutions is expected to hit $357.4 billion in 2010, an increase of 2.9 percent. Global spending on IT products and services should grow to $393.5 billion by 2012, a 4.9 percent compound annual growth rate from 2010 to 2012, according to a report released Thursday by Celent.

Infosys Technologies, meanwhile, had good news for the services sector Tuesday, reporting revenue of $1.2 billion for the fourth quarter, up 5.2 percent over the same quarter in 2008.

The week also saw a range of mergers and acquisitions. Though the deals were small -- the terms of most of them were not disclosed -- the continuing M&A adds to the general sense that the tech market remains dynamic. Among the deals:

--Science Applications International Corporation (SAIC), a big U.S. government contractor, said Thursday it had signed an agreement to acquire CloudShield Technologies, a cybersecurity and management applications provider.

--CA Monday announced it had acquired Oblicore, a maker of service-level management technology that could help develop capabilities for companies that want to extend management to cloud computing environments.

--Also, Monday, middleware vendor Progress Software said it had purchased BPM (business process management) vendor Savvion for approximately $49 million.

Note: When you purchase something after clicking links in our articles, we may earn a small commission. Read our affiliate link policy for more details.
Shop Tech Products at Amazon