Little Holiday Cheer Ahead for Businesses

IT and the Economy

It’s going to get worse before it gets better.

A new survey released today indicates businesses’ fiscal challenges are impacting everything from capital spend to job creation. For IT companies, that’s even more confirmation that they might want to start thinking about how to cope with a customer pulling the plug on that big tech project they had been planning all year.

“These are the worse numbers we have ever seen,” Paul Carton, research director at ChangeWave, said during an online survey presentation this morning. “We have been in a downward spiral since January and that has just rapidly accelerated into a freefall at this point.”

According to ChangeWave Research’s corporate spend survey, 45 percent of all companies are slicing capital budgets, with 30 percent of orders being canceled.

According to the survey, which polled 3,029 professionals, 51 percent expect their company sales will fall below fourth quarter predictions. That’s a jump of 16 percent from the previous survey. Carton said the sales projections are the worst since the 2001 recession timeframe.

New hire numbers have dipped as well, with 31 percent reporting less new employees than a year ago. “That’s an astonishing number as it was just 14 percent in June 2007,” Carton added.

The latest corporate outlook arrives at what’s typically a boom time for business, thanks to holiday and end-of-year spending. Carton said December had been a peak point for boosting budgets and revenue — that is, until last December, when the situation began waning. The decline gathered speed in the past few months, he added.

An earlier ChangeWave report had warnings on IT spending in particular. The projections for first quarter of 2009 are “abysmal,” noted the firm, and represent the worst reported in a survey since 2001. An unprecedented 45 percent of respondents said IT spending would decrease in the first quarter of 2009 — a 16 point increase than the previous survey.

ChangeWave’s newest addition to the season’s grim news comes just hours after the U.S. Labor Department released a report that found American companies cut 533,000 jobs in November — the biggest monthly reduction in 34 years.

It also caps off a week of revenue and growth warnings from companies across varied industries.

One came from Research in Motion (NASDAQ: RIMM). The BlackBerry maker, and biggest enterprise smartphone seller, is feeling the heat, reporting third-quarter revenue will come in at $2.75 billion to $2.78 billion, as compared to projections of $2.95 billion to $3.10 billion.

Chipmaker AMD warned that fourth-quarter revenue would be off by as much as 25 percent from original projections of $1.52 billion, which would be around $1.19 billion. AMD (NYSE: AMD) has set a breakeven point of about $1.5 billion, so the news squashed any potential for profitability this quarter.

So when’s it getting better?

Other industry observers have seen similar trends as ChangeWave has been reporting, but at least one has suggestions for vendors hoping to ride out the slowdown: Turn to the cloud.

[cob:Special_Report]Researchers at IDC, in the firm’s predictions for the year ahead and beyond, said that vendors who hop on trends such as cloud computing, virtualization, Web 2.0 and green IT could benefit from continued spending in those areas — which companies are turning to in an effort to save money.

“The disruptive vectors of the market will be among the highest growth sectors in 2009 as their advantages are magnified in a down economy, and suppliers who slow down their transformation will limit long-term viability and miss near-term growth,” Frank Gens, IDC’s chief analyst, said during a teleconference yesterday.

Shifting on a dime may be tough for many firms, however. A prime indicator of the current state of affairs are is shown in ChangeWave’s findings on the ease of borrowing money.

A year ago, 14 percent of those polled by ChangeWave said financing was tough to get, with the number increasing to 25 percent in September. In its most recent numbers, 30 percent of companies reported a challenging borrowing environment.

“That number has to level off and then get better for the economy to turn around,” ChangeWave’s Carton said.

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