Study: Tech spending will continue to lag in '03

While 2003 isn't looking as bad as last year for the tech economy, the idea that this could be a "recovery year" may be far-fetched, according to a study released Tuesday by analyst firm The Goldman Sachs Group Inc.

In a study of reported corporate capital expenditures in 2001 and 2002 and the projected expenditures for 2003 of 752 companies spanning 53 business sectors, the firm predicted there would be an overall decline of 10 percent in capital expenditures this year. That would come on top of a 15 percent decline last year.

While that's a small improvement, cutbacks continue, according to the study, which was done by Goldman Sachs Global Equity Research's Americas Investment Research Department.

The report concludes that the direction of IT spending will "remain on the downside" through the year. The study doesn't include all IT spending sources, including the commercial banking sector or government IT spending, so it doesn't cover the entire tech economy. And it's limited to mostly U.S. companies that are covered by New York-based Goldman Sachs.

"This message remains consistent with our view that companies continue to tighten what are in many cases already anemic capital budgets," the report said. While adjustments could take place within companies, "the magnitude of cutbacks already in place seems to support what could be another disappointing year for IT spending."

In the financial services market, which is the largest for IT spending, a small increase of 4 percent is expected for 2003, according to the study. That would compare to a 25 percent decline last year.

In the communications market, IT spending is expected to "retreat from steep declines in 2002, but [Goldman Sachs] still expects spending to be down 12 percent."

In manufacturing, IT spending is projected to increase overall by 5 percent, compared with last year's drop of 16 percent. And in the IT market itself, IT spending is projected to be down by 5 percent, compared with a hefty 33 percent decline in 2002.

A spokesman for Goldman Sachs could not be reached for comment on the report.

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