No End In Sight; CEOs: IT Spending In Holding Pattern, Future Looks Bleak

That's the message vendor executives gave last week, as the prolonged slump in IT spending showed only glimmers of a turnaround.

IBM President and CEO Sam Palmisano told financial analysts that the IT industry is in a holding pattern, and no one is certain when the turnaround will come.

"I see [IT projects teed up and justified, but [customers are just waiting," he said. CEOs aren't questioning the value of the projects, he said, adding there are unprecedented backlogs in the industry.

"The pipeline is greater than I've seen in recent memory," he said.

HP Chairman and CEO Carly Fiorina said during the company's second-quarter earnings call that enterprise spending "won't increase until CEOs and CIOs see clear signs of economic recovery."

Customers continue to buy products only to meet immediate needs, an indication their buying patterns are still conservative, said Sanjay Kumar, president and CEO of Computer Associates International, during the company's conference call.

"What customers are telling us today is that they really don't know what their growth numbers are going to be for the future, and therefore they're willing to buy today [only for the short term," Kumar said.

Solution providers agree that customers are hesitant to commit to projects.

"Customers know there is a need and a requirement; unfortunately, the budget dollars are just not flowing," said John Flores, marketing director at Sirius Computer Solutions, San Antonio. "Our first quarter was up. We had double-digit growth, but it was off from our target numbers," he said.

The domestic PC market has stabilized, said Dell Computer CEO Jim Schneider, in an earnings call. "We're seeing some signs of improvement, particularly in the corporate sector."

For its last quarter as a stand-alone company, HP reported second-quarter earnings of $252 million, or 13 cents per share, compared with $47 million, or 2 cents per share, for the year-earlier period. But revenue for the period ended April 30 was $10.6 billion, down 9.6 percent from $11.7 billion.

For its part, IBM plans to focus on earnings per share going forward rather than top-line revenue growth, Palmisano said. "Whether we're an $80 billion, $100 billion or $7 billion company is not the point."