Analysts with Deutsche Bank Securities say computer salespeople polled best described the last three months as a period of "uncertainty and frustration" when it comes to orders for servers, workstations, PCs and related hardware.
The survey conducted this week included calls to salesmen at IBM, EMC, Hewlett-Packard, Sun Microsystems, and Dell Computer, as well as a smattering of other companies.
Overall, salesmen characterized customers and CIOs as taking a "wait and see" approach, noting that many CIOs vividly remember the budget cuts of 2001 and the problems they caused. Thus, even with current approved budgets, Deutsche Bank found CIOs are "spending gingerly" in the same way they did at the end of last year.
As for the outlook for the next three months, much of it will depend on world events. Of those polled, 30 percent are expecting a pick-up while 50 percent wouldn't commit, citing all of the unknown variables related to the economy and the potential war.
On a positive note, salesmen remain hopeful that projects are still planned for this year and they believe that budgets could be flushed later this year pending a resolve in the Iraqi situation. Seventy percent of those surveyed still expect to see some signs of business improvement in the second half of this year.
"As we analyze the future outlook for our industry, we find that numerous crosscurrents exist for enterprise hardware companies as well as companies in the PC hardware space. We believe the market is still in a very uncertain phase where 'hope' is the main driver," Deutsche Bank Analyst George Elling said in a briefing to investors. "Although there are segments of the industry that are still doing reasonably well -- such as government, healthcare, and retail -- for the most part CIOs continue to closely monitor spending and new projects are only undertaken when ROI on these projects appears compelling."
Elling says when CIOs do spend, they primarily focus on maintenance and lowering total cost of ownership. Salesmen believe the PC upgrade cycle has, in fact, been occurring, and will continue. In addition, customers are pursuing new technologies such as blade servers and the use of Linux. They also continue to believe server consolidation and SANs are projects that must be undertaken in the near future.
"As one salesman put it, 'several of my customers have gone over two years in which they have not really initiated new ventures. I know they are still planning major upgrades and it will just depend on when they feel a comfort level to initiate the projects.'" Elling said. "In my view this quote sums up the feelings of many of the salesmen we spoke with."
So who has the best odds of coming out of the slump smelling like a rose? Based on Deutsche Bank's calls, IBM and HP should remain at the top of the heap while Sun Microsystems could see an uptick at any signs of business improvement.
"Other positive comments from Sun salesmen include the fact that their compensation plans were finally reworked and that the salesmen have readjusted goals as of January 1st. The salesmen we spoke with appeared to be pleased with the readjustments," Elling said. "Also, pre-sales engineers appeared to be extremely excited with the roadmap Sun has outlined for future products. Netra servers are strong and new products that incorporate network computing are likely over the next few quarters."
The survey also found Sun's recently announced Project Orion is expected to be "hot" and StorEdge also appears to be doing well.
On the negative side, the survey found the LX50, Sun's Linux offering, has done poorly and salesmen felt the company missed the price point. In addition, Sun's application server software from SunOne has problems although the portal server software is doing well.
For IBM, POWER blades (i.e., blades running on its PowerPC chips); T-Rex, a new zSeries family; and the company's POWER4+ chip and POWER5 chip were viewed as promising.
The transition to HP's Itanium-based servers was regarded as "favorable", but few have made the transition as of yet. Less clear is customer's commitment to switch to HP-UX.
Of the products most likely to get an excited response were ones coming from Dell. The company is close to launching new 8-way servers over the next few months and those polled were "very excited" about the low-end CX200, which Dell will begin manufacturing shortly.
As to the question of who really holds the purse strings in IT spending -- the CIO or CFO? -- those polled believe the CIO remains king with regard to overall spending patterns. While CFOs may limit budgets, they typically do not second-guess a CIO's estimates for technology spending.
However, many of the CIOs Deutsche Bank spoke to indicate very cautious and controlled spending patterns, which seems to echo the current economic uncertainty.