4Q IT Spending To Contract - Impact for HP, Dell, Apple

Back in May we reported on the continued slowdown our ChangeWave surveys were seeing in corporate IT spending. At the time we characterized it as “Rolling off the throttle.”

Three months later and the IT spending racecar is still downshifting – with the latest ChangeWave survey showing another slight contraction in the rate of IT spending growth for the 4th quarter.

A total of 1,907 Alliance members involved with IT spending in their organization participated in the latest survey, conducted August 13-22, 2007.

Anatomy of a Downshift

A total of 24% of respondents reported that their company will increase IT spending in 4th quarter – a decline of 2 points from the previous quarter to the lowest level in more than four years.

Another 17% of respondents told us that their company’s IT spending will decrease (or there will be no spending at all), which is 1-point worse than the previous survey.

Moreover, this is the third-consecutive survey in which we’ve witnessed a downturn in the rate of projected IT spending growth.

The current survey did have bright spots, however.

3rd Quarter Still On Track

Despite the above findings, when we asked respondents if their IT spending is on track thus far in the 3rd quarter, a relatively positive 16% said they’ve spent “More than Planned” – up 2-pts from previously.

We also asked them to rate the current willingness of their company to spend money on IT products and services, and a robust 57% said their company has giving a “Green Light” to IT spending (i.e. spending is normal). That figure is only 1-point off from the previous quarter.

Another 30% say their company has given a “Yellow Light” (i.e. spending is downsized, though not completely stopped), and 9% say their company has given a “Red Light” (i.e. spending is on hold). The combined “Yellow Light/Red Light” percentage (39%) is unchanged from the previous quarter.

While the overall picture is one of modestly slower growth, there is nothing whatsoever in these numbers to suggest a recession. As ChangeWave founder Toby Smith puts it:

At times like these, it helps to have the solid data from our 11,000-member ChangeWave Alliance. In 2001, our surveys showed a big pullback in consumer and capital spending, and we called that a recession. The latest Alliance survey results show only a tiny pullback. Guys, we're not looking at a recession. We are looking at a slowdown.

Corporate PC Growth: Weighing H-P, Dell & Apple

Going forward, there are signs of slower corporate PC growth for the coming 4th quarter.

One-in-four respondents (25%) say their company isn’t planning to buy laptops during 4Q – 2-points worse than last quarter. In addition, 29% say they’re not planning to buy desktops, a 3-point decline since previously.

And what is the effect on three of the industry’s biggest players – Hewlett-Packard (HPQ), Dell (DELL) and Apple (AAPL)?

Hewlett-Packard. Our findings show Hewlett-Packard’s corporate PC share only nominally affected, with a 1 point decline in corporate planned purchases of desktops (18%), and a 2-point drop in planned purchases of laptops (15%).

Dell. Showing signs of stabilizing after a two-year-long decline in the corporate market – there was no change in planned fourth quarter purchases for Dell desktops (34%), and only a 1-pt drop in planned Dell laptops (32%).

Apple. Apple’s planned corporate laptop share remained unchanged at 6%, while its share of planned desktops held steady at 5%.

Bottom Line

So, do the survey findings point to any engine problems in our IT spending racecar? No, but the slight contraction in the rate of corporate IT spending growth for the 4th quarter does show a downshift in progress.

Will the IT spending engine continue to slow or will it rev up before year’s end? Check back with us in the near future for a real-time race update.

Paul Carton co-wrote this article.

--------------------------------------------------------------------------------------------------------------------- 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.

Comments

[Celestialnavigator]

You comment on corporate desktop and laptop sales. Why no comment on server sales, which represent a much bigger chunk of corporate IT spending?

[Celestialnavigator]

You comment on corporate desktop and laptop sales. Why no comment on server sales, which represent a much bigger chunk of corporate IT spending?

[Celestialnavigator]

I am also curious about the demographics of the businesses surveyed. What is their IT spend over a typical IT cycle? What is the IT cycle of these businesses (how often do they upgrade hardware and software)? Where are the businesses located? Do they represent any particular portion of the manufacturer's markets, so that we can extrapolate from these results to gain some notion of the actual effect on the hardware suppliers?

Can ChangeWave offer statistics showing correlation between the numbers featured in their reports (which are reported as qualitative predictors of future IT spending) and actual results in the featured quarters?

If ChangeWave can show evidence that their community can predict, in a useful way, any characterizable segment of the IT market, their survey results would be very interesting indeed.