HP, Apple Remain Bright Spots Amid Corporate IT Spending Slowdown

In the world of motor racing, there's a big distinction between rolling off the throttle and slamming on the brakes. One causes you to slow gently, while the other causes a violent disruption to your vehicle.

Business IT spending is rolling off the throttle but hasn't yet slammed on the brakes, according to the latest ChangeWave survey conducted in May.

While there is an undeniable slowdown in projected growth for the third quarter and signs of spending weakness throughout the second half of the year, one segment of the corporate spending picture looked steady -- solid PC growth, with Hewlett-Packard (HPQ) leading the charge.

Dell (DELL), on the other hand, remained a glaring exception -- its PC market share woes seem likely to continue.

A total of 2,029 Alliance members involved with IT spending in their organization participated in this survey.

Slowdown in Corporate IT Spending

Only 26% of survey respondents reported that their company will increase IT spending in the third quarter -- a six-point contraction from the previous quarter. Another 16% reported IT spending will decrease (or there will be no spending at all), which is four points worse than previously.

As the following chart shows, projected IT spending growth remained positive, but the percentage of companies reporting increased spending is at its lowest point in four years.

As a further bearish sign, when we looked ahead at the second half of 2007 (July through December), only 28% of respondents said they thought their company's IT budget will be greater than it was in the first half of 2007 -- a five-point drop from the previous survey.

HP Shines

Despite the spending growth slowdown, rays of light continued to shine through. Corporate PC growth for the upcoming third quarter looked steady, with Hewlett-Packard projected as the biggest beneficiary of IT spending. Planned purchases of HP desktops were up one point since February to 19%, and HP laptop purchases looked to fare even better -- up two points to 17%.

Those who follow ChangeWave Alliance research know how remarkably accurate we've been on Hewlett-Packard for the past two years.

Here's a recent example:

ChangeWave's March 2007 consumer survey found HP experiencing "strong market share gains for desktops (up three points to 30%) and laptops (up three points to 25%) during the past 90 days. Looking ahead, the momentum for HP continues -- with planned purchases of desktops and laptops increasing three points each."

Fast forward to the May 9, BusinessWeek article, "Hewlett-Packard's Very PC Quarter," immediately following HP's latest announcement.

The article's subhead read "Hewlett-Packard has Good News for Investors -- and Bad News for Competitors," and the story went on to report, "That's the easiest way to interpret the bullish news from HP (HPQ), which raised its revenue guidance for the quarter. It also boosted its per-share earnings estimate.

"The good news, HP said, came primarily from its personal computer group, which has recently propelled HP to the top of the PC market, ahead of longtime market leader Dell (DELL), which has been struggling to right its operational ship."

Dell Fizzles

Turning to Dell, the ChangeWave Alliance has been tracking its decline for the past year-and-a-half -- and our latest corporate spending survey showed more of the same for the embattled box maker in the third quarter -- with a one-point decline in planned purchases for desktops (34%) and laptops (33%).

Apple Satisfies

On the Apple (AAPL) front, while its overall share of the business PC market remains small, it continues to show potential.

We also asked Alliance members who worked at companies that bought Apple computers if their companies planned to increase or decrease their third-quarter Mac purchases, and by a 7-to-1 margin they said they will increase their Apple computer purchases in the third quarter.

Bottom Line: Business IT spending is rolling off of the throttle in the third quarter, but there's still plenty of horsepower left in the corporate PC purchasing engine -- and it's coming courtesy of Hewlett-Packard and Apple.

Jim Woods co-wrote this article.

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This article summarizes the results of a recent ChangeWave Alliance survey. The Alliance is a research network of 10,000 business, technology and medical professionals who spend their everyday lives working on the front line of technological change. For more info on the ChangeWave Alliance, or if you are interested in joining, please click here.