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IDC downgrades 2005 global IT spending growth forecasts

IDC downgrades 2005 global IT spending growth forecasts

IDC downgrades global IT spending growth forecasts for 2005, due mainly to weakness in Europe and Japan.

International Data Corp. lowered its growth forecast for global information technology spending this year, due mainly to weakness in Europe and Japan, the market researcher said Wednesday.

IT spending in Europe is now expected to grow by only 4.4 percent this year, compared to a previous estimate of 5.8 percent, said Juan Orozco, research manager for worldwide IT markets at IDC, in a telephone interview. Worsening economic conditions in Western Europe caused some large firms to hold back on major IT purchases in the first quarter, IDC noted.

Spending growth in Japan will likely reach just 1.2 percent this year, IDC said, down from 3.2 percent previously, due mainly to weakness in spending on hardware like personal computers and servers. U.S. IT spending growth was revised down slightly to 5.5 percent this year from 6 percent, according to IDC.

The first quarter was broadly stable and brought solid results for many IT vendors, IDC said in a statement. However the market research company noted some mixed signals in the U.S. and that worsening economic conditions began to impact IT spending in Europe towards the end of the quarter.

Interest rates, oil prices, and currency fluctuations were all named as potential wild cards that could impact business confidence and investment in the second quarter and throughout the year, IDC said.

Global spending on information technology products in the first three months of the year was underpinned by increased technology budgets among businesses as they started new projects in security, regulatory compliance, infrastructure management and business intelligence, IDC said.

However, the market research firm revised its forecast for compound annual global IT spending growth down to 6 percent annually between 2005 and 2009 from a previous estimate of 6.5 percent between 2005 and 2008, Orozco said.

"Assuming economic stability, IT budgets should continue to grow in every region with emerging markets like China, India and Russia exhibiting the strongest growth opportunities," said Orozco.

Networking equipment was a bright spot for IT overall during the first quarter, a period that saw India overtake China as the fastest developing nation in terms of spending, IDC said. Spending on networking equipment will likely reach US$61 billion this year, IDC said, and grow at over a 10 percent annual growth rate between 2004 and 2009.

Optical equipment, the deployment of wireless networks, and "an overwhelming need for IP bandwidth" continues to drive growth for networking equipment, IDC said.

IDC's research in global IT spending includes 54 countries in all regions of the world, and focuses on hardware, software and IT services.

IDC is owned by International Data Group, the parent company of IDG News Service.

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