By Kevin Kelleher, contributor
FORTUNE -- As companies around the globe put the final touches on their 2013 budget plans, they are applying a modesty that was rare during earlier decades of Silicon Valley growth. And while many forecasts are calling for stronger spending than we saw in 2012, that's mostly because 2012 was a particularly dismal year for tech spending. In other words, the new normal has taken over the world of enterprise tech.
Every year, research firms survey information and technology executives to come up with their best guesses at how much money will be spent on new technology. The surveys are regarded as bellwethers for hardware and software companies that sell the bulk of their products and services to other corporations.
For several years, tech companies that rely more on consumers have weathered the weak global economy better than their peers in the enterprise sector. While companies like Google (GOOG) and Apple (AAPL) have seen strong revenue and profit growth, stalwarts like IBM (IBM) and Microsoft (MSFT) have struggled to eke out any growth.
Google, for example, is expected to see its revenue grow 43% when it reports 2012 earnings, while Apple posted 45% growth in its last fiscal year. Microsoft, by contrast, is expected by analysts to see 9% annual growth, while analysts are bracing for a 2% decline in revenue when IBM reports revenue this month.
But 2012 may have been the toughest year for business technology since 2009, in the depths of the Great Recession. Tech-research firms Gartner and Forrester both calculated that when all was said and done in 2012, companies ended up spending only 1.2% more than they did in 2011, an anemic rate at best. Initially, both firms had been calling for growth closer to 5% for 2012.
Earlier this month, the two firms issued reports with their forecasts for 2013. Gartner is looking for IT spending to increase by 4.2% this year, a few notches up from its previous forecast of 3.8% growth. Forrester is projecting an even cheerier 5.4% gain. But much of these increases are due to currency fluctuations. In dollar terms, Gartner expects a 3.9% rise and Forrester a 3.3% rise.
Other researchers at Wall Street firms are expecting even slower growth. A survey from Goldman Sachs released in November forecast 3% growth in U.S. IT spending. A second report from JP Morgan sent some shock waves through the tech sector when projected global IT growth of just of just 1.7%—below the global GDP growth rate of 2.4%.
To be sure, the Gartner and Forrester reports came several weeks after the Wall Street reports and at a time when much of the uncertainty surrounding the fiscal cliff was beginning to clear up. That uncertainty had left many companies especially cautious about allocating money if U.S. budget negotiations pushed the economy into another recession. But JP Morgan seems to be standing by its bearish forecast. On Monday, analyst Mark Moskowitz cut his ratings on IBM and EMC (EMC) to Neutral from Overweight, citing the 1.7% growth estimate.
The stocks of several large tech companies have had a rough time in recent years, thanks to the penny-pinching in IT budgets. Intel (INTC), Microsoft, IBM and Hewlett-Packard (HPQ) all underperformed the S&P 500's 13% gain in 2012. And have been trading well below that index's price-earnings ratio, which currently stands at 17.
Until the prospect of a stronger economic recovery becomes evident, they are likely to keep languishing. For all that gloom, however, there is some good news for tech spending in 2013. Not all of the sluggish growth will be across the board, with companies willing to spend in a few key areas of growth.
Recruiting firm Teksystems surveyed more than 600 IT managers and found that while only 48% of them were planning on increasing their IT budgets in 2013 (with the rest cutting budgets or keeping it the same as in 2012), some areas like the cloud, storage and tablets will see disproportionate growth. Gartner and Forrester also saw strong growth in these areas.
The catch is, these hot spots of IT spending are popular in large part because they can add to overall cost savings. Tablet sales are surging because they can be bought at a fraction of the cost of a desktop or laptop PC and cloud services can help companies avoid spending on the maintenance and upgrading of proprietary software suites. Which means that barring an unexpectedly strong global economy in 2013, the coming year for many IT products and services—and for IT spending in general—is shaping up to be another tough one.
The enterprise giant's stumble may not bode well for the technology sector -- and not just enterprise providers, but all big cap tech companies.
By Kevin Kelleher, contributor
FORTUNE - Oracle missing its earnings guidance is like Mariano Rivera blowing a save opportunity, or Bob Dylan putting out a disappointing record. It happens, but not very often. And when it does, the only real question is: Why?
The answer matters beyond the world MOREDec 22, 2011 11:50 AM ET
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