Q4 2009 IT Market Data As We Expected Shows End of Tech Downturn
The first reports on the IT market in Q4 2009 are now in, and they are in line with our prediction that the tech market recession ended in that quarter (see US And Global IT Market Outlook: Q4 2009). Overall, the tech market in Q4 2009 was more or less flat with the same quarter the year before – an improvement from prior quarter when growth was negative, and evidence that the 2010 tech market will post positive growth.
- The US economy was stronger than expected, by 5.7% real GDP is an aberration. The US Department of Commerce released preliminary data on Q4 2009 economic growth, and the results was a surprisingly strong 5.7% in real GDP, 6.4% in nominal GDP from the previous quarter (on a seasonally adjusted annualized basis). However, about two percentage points of that growth was due to inventory re-stocking, which will not be repeated in future quarters. And based on prior GDP reports, this growth rate will probably be revised down as new data comes in. (In Q3 2009, the growth rate in real GDP started at 3.5%, but ended up revised down to 2.2%.) Still, this report confirms that the US recession is over, and slower by steady growth is likely for the rest of 2010.
- US business investment in information technology fell by -1.7% from the year before. The same GDP report showed that investment by US businesses in computer equipment, communications equipment, and software was just 1.7% below Q4 2008 levels. The only surprises were how strong growth in computer equipment was (up 9.8% from the year before), and how weak software was (down -5.3%). We expected computer equipment would be up and software to be down, though not as much in either direction as happened. We think computer equipment growth will be revised down, and software growth revised up as the Department of Commerce collects additional data.
- Global revenues of the large IT vendors we track had zero growth, which is positive. So far, we have Q4 2009 financial reports for BMC, CA, CGI, EMC, Ericssion, IBM, Infosys, Microsoft, Motorola, SAP, Siemens IT Services and Solutions, Symantec, Tata Consultancy Services, and Wipro (plus Accenture and Oracle who reported back in December revenues for their quarters ending in November 2009). Sifting across these results, we are seeing Q4 2009 global revenues as being flat with 2008, with US market revenues up by 1%.
- Among vendors, software came in strong. Software vendors like BMC, CA, EMC, IBM, Microsoft, Oracle, SAP, and Symantec in total had 6% global growth in revenues, and 4% in the US. That's why we think the US Department of Commerce data on US business investment in software will be revised up.
- Hardware vendors also had strong growth. Fewer computer hardware vendors have reported so far (just EMC and IBM), so the growth of 1% in Q4 2009 we have seen to data probably understates the final result. Server revenues will still be down (as IBM's hardware revenues were) but storage revenues will be better (as EMC's storage hardware numbers showed). Microsoft's very strong growth in Windows revenues in its quarter ending in December 2009 is a sign that PC sales will be up by 5% or more when the big PC vendors like Dell and HP (as well as Fujitsu, Hitachi, Lenovo, and NEC) report in coming weeks.
- IT consulting andsystems integration revenues are still down, but IT outsourcing is on the rise. As a group, IT services vendors like Accenture, CGI, IBM Global Services, Infosys, Siemens IT Services, TCS, and Wipro far are showing 1% growth in revenues in Q4 2009. However, IT consulting and systems integration revenues were down by 8%, while IT outsourcing revenues are up by 9%.
- Communications equipment revenues are down. As we expected, communications equipment is the lagging segment of the IT market. With vendors like Ericsson, Motorola and Nokia already reporting but Alcatel-Lucent and Cisco still to come, revenues are down by -7% globally and -1% in the US. The Department of Commerce data on business investment in communications equipment in Q4 showed a decline of -1%.