The European information technology (IT) sector is sliding towards single-digit growth – and will be in recession by mid-2002 unless IT spending unexpectedly revives. The overall growth rate of IT vendors in the region, as gauged by the Infoconomy EuroIndex, fell for the ninth consecutive month during February 2002, slipping to 10.7% from 13.0% the previous month. While this points to accelerating decline, the European picture still looks relatively robust when compared to the -14.1% rate of Infoconomy's US-dominated global index.
Surprisingly, negative influences on the index came from two Israeli software companies – firewall and virtual private network software vendor Check Point Software, where revenue in the latest quarter was down an uncharacteristic 13%, and Mercury Interactive, a major player in testing and application performance management, where sales fell 7%. Also pulling the index in the wrong direction was Germany's SAP. The business applications software giant turned in a below-par growth rate of 7%.
Several other European software companies had the opposite effect. Enterprise resource planning company Intentia of Sweden reported a quarterly revenue hike of 31%; France's Dassault, in engineering software, managed a 25% increase; while Software AG of Germany posted quarterly revenues up 36%. Financial software companies Misys and London Bridge reported 2001 revenues up 16% and 31% respectively.
Despite these positive numbers, the trend for the next few months in Europe is still likely to be downwards.
Healthy growth ahead(!)
It is not the story that charts tell, but the global technology sector is set to begin a period of healthy growth. And that will help to return confidence, not just to the troubled sector, but to the tech-centric US economy.
The Infoconomy 200 index, which tracks the revenues of the world's largest publicly listed technology companies, shows a continuing and strong decline in the fortunes of technology companies. Figures at the end of January show that year-on-year revenues, mostly based on recently quarterly results, had shrunk by a miserable 14.1%.
Now the good news. The data that goes to make up the January figures are mostly based on a comparison of a very good quarter, at the end of 2000, and a pretty awful quarter, at the end of 2001. From April onwards, the figures will be comparing bad quarters in 2001 with improving quarters in 2002. That doesn't mean the size or profitability of the technology industry will have recovered to previous levels. But a new and lower baseline will have been reset.