Goldman Sachs: IT spending has bottomed

“At last, the bleeding stops,” begins the latest information technology spending survey report issued by investment firm Goldman Sachs. The quarterly report, which polls 100 IT managers at multinational Fortune 1000 companies, said 2003 IT spending was now “back to roughly flat” (-0.4%), up from results in an April survey, which reported a 3% drop in spending.

Though the report calls a recovery in the second half of 2003 “an overstatement,” it points out that 24% of survey respondents expect IT spending to accelerate during the second half of the year. Forty-six percent said they expect IT spending for the third quarter to be flat, while 41% said they expected it to rise from second-quarter levels.

“Although the spending outlook in our latest survey remains far from rosy and pricing showed further entrenchment, several other sentiment indicators saw a bounce from the April trough,” the report stated. “CIO sentiment finally shows bottoming.”

The report also takes a preliminary but “optimistic” look at 2004, in which overall IT budgets should grow 3.5%. Twenty-six percent of respondents also said they planned to increase their capital spending by 10% or more next year.

In the portion of the survey that asks CIOs and IT managers to rank the importance of several product areas, respondents continued to list wireless LAN connectivity and virtual private networks among their high-priority projects, as they did in the April 2003 survey. But voice-over-IP equipment, which participants called a high priority in April, sank past medium to low-priority in this month’s report as other projects (e.g., database and integration software and systems integration) climbed up the list to become high priorities. Data networking, gigabit Ethernet and storage networking remained as “medium” priorities, as they were in the April survey.

The report comes as investors seem to be showing renewed optimism in the technology sector. Lifted in part by reports that Microsoft may issue a sizable special dividend to shareholders, the NASDAQ rose to a nearly 14-month high today.