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October 02, 2006

Telecom Equipment Sags along with Overall IT Spending, Study Shows

By Robert Liu, TMCnet Executive Editor

Telecom spending likely weakened in September in line with the sentiments for overall IT spending, according to projections from the latest quarterly survey of Chief Information Officers (CIOs) by Deutsche Bank and CIO Magazine.
CIOs projected IT budgets to grow by 6.5 percent over the next 12 months in the July-September poll, down from 6.9 percent in the April-June poll. CIOs report that IT budgets increased by an average of 5.0 percent over the last 12 months, down from 6.9 percent last quarter, according to the latest results released Monday.

The telecom sector also ticked downward in the September quarter with 34.6 percent of survey respondents projecting an increase in telecom equipment spending in the next 12 months, down from 43.6 percent in June. Conversely, the number of CIOs forecasting a decrease of telecom equipment spending rose 20.8 percent from 14.5 percent while undecided panelists rose to 43.4 percent from 40.2 percent.
“We are forecasting mid-single digit growth in wireless network spending in 2006 drive by ongoing 2G network build-outs and improvements in developing countries and 3G upgrades in developed countries,” wrote Deutsche Bank analyst Brian Modoff. He added that spending in 2006 could improve if large emerging countries like India and China issue 3G licenses.
The survey showed storage continues to be the number one spending priority for CIOs, followed closely by security software and computer hardware. In addition, CIOs indicated they were not concerned by the pace of technology vendor mergers and acquisitions by a 6-to-4 ratio.
“Storage regained its position as the top spending priority for CIOs. However, future spending expectations for most other categories declined,” says Chris Whitmore, Director, IT Hardware Research for Deutsche Bank Securities. “CIOs at very large enterprises were more positive than the past two quarters, suggesting we may see typical seasonal strength among large enterprises exiting the year.”
Robert Liu is Executive Editor at TMCnet. Previously, he was Executive Editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg. For more articles, please visit Robert Liu's columnist page.


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