Microsoft benefits from IT spending growth

Forrester forecasts nearly 10 percent U.S. increase in 2010

This recession has been going on for more than two years, but within some enterprises, there must be some people saying, “Heck, get out the checkbook. Let’s do this,” and are spending on new information technology.

Two events this past week indicate that for IT vendors, business is looking up. One is a report from Forrester Research forecasting IT spending growth in the U.S. of 9.9 percent this year, over last; global IT spending should grow by 7.8 percent. The other is Microsoft’s earnings report of a 48 percent increase in profit on a 22 percent increase in revenue in the quarter ended June 30, beating analysts’ forecasts.

Despite a string of news for Microsoft about will-they-won’t-they make a tablet computer, the Kin flop, losing the largest valuation title to Apple and uncertainty about whether Windows Phone 7 will be a hit, enterprises are spending money on IT and spending it at the Microsoft store.

Jeffries analyst Katherine Egbert called Microsoft’s results “sizzling” and expects its Windows business to see double-digit growth for the next two years, according to an AP story in which another analyst, Sasa Zorovic of Janney Capital Markets, attributed Microsoft’s record results to Windows 7,Office 2010 and SharePoint 2010.

Ten Windows 7 licenses are sold every second, Microsoft reported, for a total of 175 million since its introduction. Already, 15 percent of the PCs in the world are running the new operating system.

In spite of what some economists may be saying about a double-dip recession and stubbornly high unemployment, enterprises also must keep their eye on the calendar. Forrester attributes the stronger growth to companies “entering an innovation cycle marked by adoption of new technologies.” Many companies adhere to a refresh cycle where they replace servers, desktops and software on a regular basis and this must be the year. And just in time, Microsoft introduces Office 2010 and other enterprise software in the latest quarter.

Computer equipment and software will be the strongest categories, with PCs, peripherals, and storage equipment leading the computer category, and operating system software and applications setting the pace for software,” Forrester reported.

The Wall Street Journal put it more succinctly: “At some point, businesses have to buy new computers,” it reported yesterday.

Besides Microsoft, Intel also reported strong results, including a 34 percent jump in revenue. If Intel is selling more chips, that means computer makers are planning to build more computers and load them with software from companies like Microsoft. It’s nice how that all works out.

Source

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