Software spending may be weak for second half: Report

PALO ALTO: Chief information officers recently surveyed by analysts at Morgan
Stanley have sobering news for software vendors - many of them have no plans to
increase technology spending in the second-half of the year. "It's what we
had feared all along. Now we have confirmation," Morgan Stanley analyst
Chuck Phillips told Reuters on Friday.

Chief information officers set companies' technology priorities and only 34
per cent of CIOs who responded to Morgan Stanley's questions said they planned
to spend more money during the remainder of 2001. "It's just the opposite
of what we usually see," Phillips said. That means software makers could
experience a small, unexciting blip in December sales, he said.

Software sales tend to jump during a company's fourth quarter as commissioned
salespeople push to get deals included in annual results and customers drag
their feet to exert maximum pressure in negotiations.

While most software makers have so-called back-ended results and could be
hurt by lackluster spending in the second half, not all peg their financials to
the calendar year. Oracle Corp.'s fiscal year ends on May 31 and Microsoft Corp.
wraps up the year's business on June 30.

The Morgan Stanley survey, which was issued earlier this week, also found
that CIOs are reducing the numbers of software vendors they work with and remain
reluctant to undertake large, expensive projects. "There aren't many things
people are willing to spend $20-$30 million on right now," said Phillips,
who noted that companies are looking for easy, low-risk projects.

That could be good news for the world's biggest software maker. The survey
found that CIOs were most likely to say they would increase second-half spending
on Microsoft’s Windows 2000 desktop and server upgrades, Microsoft Office
upgrade; e-commerce initiatives and network equipment.

(C) Reuters Limited 2001.