IT spending is likely to see lower growth this year before seeing revival in 2014, according to a report released by JPMorgan Chase & Co. (NYSE:JPM).
JPMorgan's Analyst Cuts IT Spending To 0.6%
JPMorgan Chase & Co. (NYSE:JPM)’s analyst Mark Moskowitz has lowered the IT spending estimates to 0.6 percent from the previous forecast of 1.2 percent.
The recent report from JPMorgan clearly signifies that global IT spending has apparently not bottomed out, trailing global GDP in 2013.
However the analyst exudes confidence for 2014, by projecting an IT spending growth rate of 3.6 percent.
Mark Moskowitz’s lowered projection for 2013 stems from the belief that businesses would be spending less on their IT hardware, as they shift more of their spending away from the traditional computers towards mobile devices.
The downward revision in IT spending is accentuated by lower spending in IT hardware, which would be slightly offset through increased spending in the services segment.
JPMorgan Analyst's Observation
In his note to clients, JPMorgan Chase & Co. (NYSE:JPM) analyst Mark Moskowitz observed that post-recession reinvestment in IT peaked in 2011, after major investment cycles began in 2000, thanks to server virtualization and data center optimization.
The analyst however feels the mobile trend continues to grab IT spending away from the traditional PC's. He anticipates spending on PC's to drop by 8.3 percent as against the earlier estimates of decline by just 1.8 percent.
JPMorgan Chase & Co. (NYSE:JPM) analyst is positive on the IT spending towards services segment as this segment is expected to rebound as customers start evaluating architectural shifts in their IT infrastructure.
The analyst expects, on a regional basis, EMEA and China would be the main sources of incremental softness, while anticipating U.S. market outgrowing the broader IT landscape. However Mark Moskowitz feels there is limited upside potential in the U.S. due to potential effects of sequestration.
JPMorgan Chase & Co. (NYSE:JPM) analyst expects a temporary slower IT infrastructure spending would be accentuated with increased attention gained by cloud computing.
Turning to his top picks in IT hardware, the analyst feels Apple Inc. (NASDAQ:AAPL) and NetApp, Inc. (NASDAQ:NTAP) would be benefited. While Apple Inc. would be benefited through its market-leading position in the tablet market, NetApp, the provider of storage and data management solutions, could gain its market share in coming quarters.
Mark Moskowitz ranks Symantec Corporation (NASDAQ:SYMC) and CA Inc. (NASDAQ:CA) as the best stocks in the software space, as fixed income investors would try to leverage their significant yield opportunity. He anticipates discretionary spending would show an uptrend in the IT services space, as clients strive to maintain competitiveness and cut costs to obtain priority funding. Genpact Limited (NYSE:G) is Mark Moskowitz’s preferred name in the IT services space.
JPMorgan Chase & Co. (NYSE:JPM)'s report however strikes a note of optimism as the analyst believes clients would embrace new technologies such as cloud, big data, social, and mobility as they are expected to have huge impacts on various industries.