Wall Street Beat: Tech stocks hold their own as markets surge

Sequestration will hurt IT spending, but tech sector growth will continue, industry insiders say

By , IDG News Service |  IT Management

The sentiment is borne out by other analysts and industry insiders. Total IT spending on hardware, software, and IT services will grow by 6 percent in 2013, to approximately $474 billion IDC said this week. In its forecast, IDC noted that the U.S. economy has been clouded with uncertainties surrounding the sequestration, contracting GDP growth and declining international trade due to recession in Europe. But IDC said it expects the U.S. economy to stabilize in the second half of 2013, leading to moderately strong IT spending growth.

"We've seen continued investments by companies as they prioritize the replacement of outdated technology, and pursue strategic IT initiatives focused on big data and analytics, cloud computing, and mobility,"said Ted Dangson, an IDC analyst, in the report.

Tech industry players also appear to be confident in the U.S. economy's ability to drive growth, said Hank Galligan, partner and director of the software practice at BDO USA, an accounting and consulting organization. Out of 100 technology company CFOs polled by BDO recently, most respondents -- 37 percent -- listed the economy as the most important factor driving growth in the sector, Galligan noted. In last year's BDO poll, 50 percent of the CFOs listed the economy as the most important factor driving tech growth, but the year-over-year decline does not necessarily mean the industry insiders are losing confidence, Galligan said.

"The expectation is a little more baked in, if you will: there's more confidence now that the recovery will continue and so it's not top-of-mind anymore," Galligan said.

Twenty-eight percent of the respondents in the BDO poll said that consumer demand for innovative personal tech would be the key factor fueling growth in the sector this year. Sequestration is not likely to affect that sentiment, Galligan said. "The type of person who wants the latest mobile phone every two years is going to do that whether or not there's that government cut back," Galligan noted.

One sector that all industry experts agree will be hit hard this year is hardware. Global PC shipments are projected to drop 1.3 percent in 2013, IDC forecast this week. The silver lining in that figure is that it's not as bad as the decline in 2012, which was 3.7 percent.

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