Companies Goldman sees as well positioned to benefit include Apple Computer (AAPL), Cisco Systems (CSCO), Google (GOOG) and Microsoft (MSFT). (I would note that if you had started 2006 owning only Apple, Cisco, Google and Microsoft, you would be having a very merry Xmas this year: as of a few minutes ago, Apple is up 27% year to date; Cisco is up 59%; Google, 17%; and Microsoft, 11%.)
The Goldman report notes that almost two-thirds of IT spending comes from four key sectors of the economy. IT spending in financial services should grow at a similar rate to 2006, Goldman says; communications sector spending should pick up; but manufacturing spending should decellerate. Government spending is expected to be stable.
Here are some other tidbits from the Goldman report:
- Server virtualization goes mainstream: Server companies will have to contend with dull 6%-7% type industry revenuegrowth for several years, in our view…the key beneficiary (of virtualization), by a wide margin, should be VMware, whose intrinsic value within EMC (EMC) continues to grow. Also likely to benefit: Intel (INTC) and AMD (AMD), both of which are developing virtualization-specialized processors…Dell will probably escape the realities of virtualization in 2007 because of easy comparisons, 2008 could be a more difficult hurdle given its exposure to volume servers, which should be hit the hardest.
- Service-oriented architectures go from experimentation to implementation: Middleware sales among large infrastructure vendors should continue to see a tailwind to growth owing to demand for SOA management platforms. This would include Oracle (ORCL), Microsoft, SAP (SAP), IBM (IBM), BEA Systems (BEAS), and TIBCO Software (TIBX)… We expect in 2007 to see increasing effects of a push by the leading applications vendors—Oracle and SAP—into the middleware space, posing a growing competitive threat to incumbent middleware vendors that could dampen pricing and growth in 2008 and beyond for pure-play companies.
- From Web 2.0, we move to Enterprise 2.0: [I]nvestors who ignore this trend will do so at their peril given its ability to dramatically reshape leadership among enterprise technology companies and business models over the next decade…This is also where large IT incumbents such as Microsoft, IBM, Oracle, and SAP will likely do battle with up and coming SaaS vendors as well as Internet giants Google, Yahoo!, and eBay, which view the emergence of Enterprise 2.0 as their entry into the enterprise.
- Power and heat issues come to the fore in the data center: Problems of heat from sprawling server farms and accelerating power costs from servers and air conditioning are driving the need for new technologies in the data center, benefiting companies in both the old and new world.
- Networking: Many tech decisions become network decisions: We expect corporate network spending to continue to outpace overall corporate IT spending in 2007. In addition to a mix of simply end-of-life and capacity-related purchases, we see IT decisions increasingly tied to the network.