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IDC Revises 2010 IT Spending Forecast Upward

These days, you never hear of economic growth being underestimated. But research firm IDC believes that its optimistic forecast for strong IT spending in 2010 wasn't optimistic enough; the firm is revising its projections upward. In March, IDC forecast 3 percent growth in global IT spending for the year. This week, the research firm now calls for 6 percent growth, a total of $1.51 trillion, as customers satisfy pent up demand for new IT.

"The first half of 2010 was robust by any standards for the IT industry," says Stephen Minton, vice president of worldwide IT markets and strategies at IDC, citing increased shipments of PCs as well as enterprise It such as servers, storage and networking equipment. "While the high growth rates recorded by many vendors in the first two quarters of 2010 are partly a reflection of how bad things were in the same period of 2009, there's also no doubt that it partly reflects a very real swelling of pent-up demand," he says.

The surge in IT spending was lead by double-digit growth in emerging markets such as China (21 percent), India (13 percent), Brazil (14 percent), and Russia (17 percent). Among what IDC calls "mature economies," growth will be more modest. IT spending in the U.S. is forecast to grow by 5 percent in 2010 after a 4 percent decline in 2009, while Western Europe is expected to grow by 3 percent and Japan only 0.5 percent.

The only caveats in the report are continued concern about the debt crisis in Europe, the waning effect of government stimulus spending in the U.S. and persistently high unemployment here, all of which could portend a double-dip recession in the second half of 2010 or the first half of 2011. It remains to be seen whether pent-up demand will overcome these problems with the economy. "The next three months will be crucial to determining which of these scenarios is more likely," says Minton.

A sampling of the financial results of several key IT companies documents the growth: HP reported a 25 percent increase in profit to $2.9 billion on a 13 percent increase in revenue to $30.8 billion for the quarter ended April 30, compared to the same period of 2009. Microsoft reported a 49 percent increase in net income to $4.52 billion on a 22 percent increase in revenue to $16.4 billion for the quarter ended June 30. Oracle improved net income by 25 percent to $2.4 billion on a 39 percent jump in revenue to $9.5 billion for the quarter ended May 31. VMware reported net income jumped 77.5 percent to $142 million on a 48 percent increase in revenue to $674 million for the quarter ended June 30.