Economy May Slow Tech Industry's Growth

Extracted from AP
Thursday December 6, 6:05 am ET
By Brian Bergstein, AP Technology Writer

Weakness in US Economy Figures to Take a Bite Out of Technology Industry's Growth Rate in 2008

BOSTON (AP) -- Weakness in the U.S. economy figures to take a bite out of the technology industry's growth rate in 2008, when analysts expect tech spending to slow around the world.

The picture is not exactly dire: A forecast released Thursday by analyst firm IDC calls for the worldwide information-technology market to grow 5.5 percent to 6 percent in 2008, the lower end of what has become a usual range. In the U.S., the market is expected to expand 3 percent to 4 percent.

Those growth rates are softer than this year's 6.9 percent worldwide expansion and 6.6 percent growth in the U.S., according to IDC.

Just a few months ago, IDC was expecting the U.S. tech market to grow 5.5 percent in 2008. The company pushed its estimate down to 3 percent to 4 percent as the mortgage crisis heightened and rising high oil prices enhanced the prospect of a recession next year, IDC senior researcher Frank Gens Sr. said.

"Those are all forces working against good growth," Gens said.

Other analyst firms differ on the precise numbers but also see a slowdown in growth coming.

Gartner Inc.'s most recent estimates, compiled in October, see U.S. technology spending rising 5.7 percent, down from 6.1 percent this year. Gartner pegs worldwide growth at 5.5 percent, down from 8 percent in 2007.

Forrester Research Inc. is still finalizing its worldwide forecast, but research analyst Andrew Bartels expects the U.S. market to grow 4.6 percent, down from 5.4 percent this year. He said that presumes an economic slowdown in the United States that stops short of becoming a recession.

Even with tech spending totaling $3 trillion worldwide, modest dips in its growth don't often cause economic swings. Instead, tech investment tends to reflect macroeconomic conditions.

"There's no question the economy is weak," Bartels said.

Many big IT providers already have been planning for overall market growth of uninspiring, mid-single digit percentages.

IDC's Gens expects to see tech companies respond in 2008 by increasing investments in markets that are relatively hotter, including mobile Internet devices and technology for small and medium-sized businesses.

"I'm not really concerned," Henning Kagermann, CEO of business-software maker SAP AG, said in an interview this week. "Even if growth in IT spending slows, it's always a question of where people are going to put their money."