Wall Street Beat: Cautious optimism reigns for tech

By , IDG News Service |  Business

Despite lingering concerns about global economic stability, analysts for the most part remain confident that IT will continue to lead markets out of the recession.

Global IT spending will increase by 3.2 percent in 2010, attaining the 2008 spending level of about US$1.5 trillion, IDC said Thursday. The research company said it based its prediction on a fairly conservative forecast -- an increase of 2.6 percent -- for global GDP growth.

Emerging markets will drive more than half the IT industry growth next year, IDC said in its 2010 predictions report. The so-called BRIC countries of Brazil, Russia, India and China will account for the bulk of emerging-market growth. IT spending will increase 8 percent to 13 percent in those countries, which by the end of the year will account for more than 10 percent of worldwide spending on IT, IDC said.

"High tech should lead us out of the Great Recession in 2010," said Frank Gens, chief analyst at IDC, on a conference call Thursday. The main themes for IT in 2010 will be recovery and transformation, he said.

"Recovery is the less interesting of the two themes," Gens noted, adding that many companies have "ambitious plans for transformation, challenging the primacy of the PC."

This year, the recession acted like a "pressure cooker" on IT, forcing IT professionals to closely examine new computing models, Gens said. Next year, recovery will release pressure on spending, enabling a number of "transformational tipping points," especially those related to mobile public network and cloud computing, Gens said.

But he dropped a note of caution into an otherwise upbeat report: "Don't get too relaxed," Gens said.

Despite general optimism, for IT investors there is a sense that the stock market may be getting ahead of reality. The tech-heavy Nasdaq exchange has flattened out somewhat in the past few weeks, on concerns that the recovery will be a drawn-out process.

"In my estimation, there is still close to an 80 percent probability ... that a second market plunge and economic downturn will unfold during the coming year," said John Hussman, president of Hussman Investment Trust, in a market comment this week. Among other factors, Hussman cited the high U.S. jobless rate.

Hussman's prediction is more dire than almost any other that market observers are making. But there are reasons to be cautious. Even though markets are stabilizing and companies are showing revenue growth compared to earlier in the year, for most vendors, third-quarter sales did not hit last year's levels.

Both IDC and Gartner this week reported that although the server market is stabilizing, sales levels for the third quarter were lower than the same period in 2008.

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