25 March 2003 Almost one-fifth of US and European companies will slow their spending on technology because of the war in Iraq, according to the latest quarterly spending survey by Merrill Lynch.
This could mean that a number of technology suppliers miss their quarterly sales and profit targets for the quarter to the end of March, says Steve Milunovich, an analyst at the investment bank.
Since many companies rely heavily on last-minute sales to reach their quarterly revenue targets, the timing of the war is unfortunate. The spending slowdown will hit “back-end-loaded” companies — those that record the bulk of their sales at the end of the quarter — the hardest, says Milunovich.
But a swift end to the war would not necessarily mean that CIOs would accelerate their spending. Ninety per cent of respondents to Merrill’s survey said their spending would not pick up if the war ended quickly. This brings into question the view of some analysts that the post-war period will create a rebound in spending.
Hardware suppliers such as Sun Microsystems and EMC will be hardest hit as a result of such caution. In addition, database giant Oracle has already issued unusually broad targets for its current quarter, hinting that total revenue would range between a 6% decline and a 2% increase, depending on how IT managers reacted to the war in Iraq.
Merrill’s findings echo those of another survey released last week by Duke University and industry body Financial Executives International. It found that two-thirds of finance heads are either spending cautiously or holding off all capital spending because of war-related uncertainty.