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Follow UsNEW YORK: Corporations usually have some money left in their budgets at the end of the year to buy computer systems, providing a holiday bonus to technology companies, but this year it looks as though the usual fourth quarter tech spending could turn out to be a dud.
Technology executives said this week they were seeing a pick-up in their customers' spending in the fourth quarter, but that it was nowhere near the usual rise from the third quarter.
"I know several CIOs that are actually being paid cash bonuses based on underspending their budget this year. There is no company out there that I'm aware of that is aggressively spending to try to flush their budget," Dan Warmenhoven, chief executive of data storage company Network Appliance told Reuters in an interview.
Customers are interested in specific areas, like wireless technology or storage management software, and less in buying the latest, fastest new computer, the executives said. "We see people using budgets in fourth quarter but it doesn't imply that 'Yahoo, happy days are here again!'" software maker Siebel Systems Inc.'s Chief Executive Officer Tom Siebel said.
Corporate spending appeared to be healthier in the fourth quarter than in the September quarter, Siebel said during a tech conference, as buyers spent budgeted amounts on information technology, a modest improvement. Technology spending has been weak for the past two years as corporations worried about profits have trimmed their budgets, hurting companies from software maker Siebel to computer hardware company Hewlett-Packard Co. to telecom equipment maker Cisco Systems Inc.
Weak quarter forecast
Most technology executives say they are bracing for a weak quarter, including computer and printer maker Hewlett-Packard. Chief Executive Carly Fiorina told investors that she expects holiday sales to be about one-third below their normal level. "We're not going to raise guidance today because the economy continues to be uncertain and at the same time we want to make sure we're not getting ahead of ourselves," Fiorina said, described current technology spending as tepid.
When customers do buy, they're handling purchases differently, making what they already have worked better and demanding a better return on what they spend on IT. "The 'hot box' era is over," Fiorina told Reuters, referring to customers' desires to purchase the latest, greatest and fastest technology. "Increasingly, customers are thinking about their total infrastructure," Fiorina said. "They don't say we're going to go out and buy this box."
"They think about systems and that's a big change," she said. One area that telecommunications leader Cisco Systems Inc. believes there will be growth is wireless local area networks, Chief Executive John Chambers told analysts this week. His company unveiled in October a mobile router for use in vehicles, with public safety agencies a target market.
Analysts say they haven't written off the fourth quarter yet, however, with microprocessor giant Intel Corp. due to give an update on its quarter on Thursday. The company sells the chips that are the brains of personal computers. "We think they'll raise guidance and try to remain somewhat conservative," Dan Niles of Lehman Brothers, said in an interview on Wednesday. (Additional reporting by Duncan Martell and Elinor Abreu in San Francisco)
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