J.P. Morgan cuts IT spending in 2013 by half due to tablet gains
Analysts are cutting their forecasts on IT spending for fiscal 2013 by half, citing weakening trends in hardware spending.
According to J.P. Morgan's Mark Moskowitz and John DiFucci in a research note (via Barrons), the rate of IT spending growth is expected to decline to 0.6 percent from the previously expected 1.2 percent, and a year-over-year decline from 1.8 percent.
It all boils down to PCs and the poor state of affairs in the computing market.
PCs are in free-fall. IDC pegged the decline at 14 percent, while Gartner was a little more conservative with just over 11 percent. Meanwhile, tablets are up 142 percent — partly offsetting the declines in the PC market but also because the tablet space is still expanding.
Server and storage sales are also expected to slide, likely due to the uptick in outsourced cloud computing services and virtualization adoption. The analysts have lowered their forecasts, citing feedback from the supply chain.
Moskowitz and DiFucci added:
Meanwhile, our research indicates that server and storage spending are sluggish, due in part to server virtualization adoption having peaked. We first made this call in late 2012 related to the potential ill-effects of server virtualization reaching a critical inflection point and becoming more of a crosscurrent or headwind.
But there's a bright side. In 2014, IT spending is expected to beat projected gross domestic product (GDP) figures and rocket to 3.6 percent, a 500 percent increase on year-over-year.
According to the analysts, they believe PC units will decline by 8.3 percent in 2013, a revised figure from the 1.8 percent decline previously stated. In terms of monetary value, PC sales will fall by 11 percent to $192 billion, while tablet sales will rocket by 37 percent to $84 billion.
It's possible by 2014, should the trend continue, rising tablet shipments could be on a par with declining PC shipments.
Here's what we see for calendar year 2013 (on the right) and 2014 (on the left):
While PCs and servers are taking the greatest hit during 2013, enterprise networking and storage are taking the highest gains outside of the tablet space. But in the following year, PCs will slow in its decline but printing and servers will see increased losses in growth. Tablets will also slow thanks to the exponential maturation of the market.
Name dropping, J.P. Morgan's "top picks in IT hardware" included Apple and NetApp, thanks to "company-specific catalysts to navigate sluggish IT spending conditions." The analysts also note IBM could be a "potential dark force," which could benefit the company over the long term should the analysts' be spot-on with their forecasts.
But storage component makers, such as Brocade and QLogic, could face "secular and company-specific headwinds," with the latter facing the potential for less certain revenue growth profiles.
(via Barrons)