All things considered, you'd expect Microsoft
Nonetheless, at a meeting in South Korea today, Ballmer threw cold water on hopes for a quick recovery in corporate IT spending, arguing that, while spending levels should gradually improve, they might never make a full recovery from the current economic downturn. Instead, Ballmer argues that there will be a "new normal" of more restrained spending, with businesses focusing on maximizing efficiency.
Depressing stuff for anyone counting on a "V-shaped" recovery to propel the shares of business IT giants such as IBM
One of these factors is massive unemployment. While the U.S. unemployment rate peaked at 6.3% during the last downturn, it has soared to 9.8% in the current one, and it's just a matter of time before we cross 10%. Throw in the millions of people who aren't counted in unemployment numbers because they're believed to have stopped looking for work, and you have a huge decrease in the number of people who need to be supported by corporate IT infrastructures. That means fewer Hewlett-Packard
The other factor is the fact that the recession has been accompanied by a credit crunch. Though the credit markets might not look as bleak as they did a year ago, the situation hasn't fully returned to normal -- whether for small businesses trying to secure low-interest loans, or publicly traded companies trying to issue new rounds of debt. Less credit means less money for capital spending, as well as more penny-pinching by businesses looking to save some money in case things get worse.
Take these factors into account, and for the near-term at least, Ballmer's pessimism seems warranted. That should give pause to investors looking to harvest further gains from investments in the IT giants -- many of which, like Microsoft, are trading near 52-week highs. At the same time, keeping in mind Ballmer's point about businesses trying to maximize efficiency, it's probably worth looking at some of the growth stories in the sector whose products help bring down IT costs. VMware
Ballmer's words of caution may not be a sign to bail out of enterprise-focused technology names altogether. But I think they are a sign that the easy money has been made, and that investors now need to choose their targets carefully.