Soothsayers at Gartner group have been examining the entrails of a fat ram and are warning that the dollar will provide a major headache for IT spending.
Gartner’s analysis of IT spending this year has been downgraded as a result of the position of the dollar. The analyst house is still expecting things to be better than 2016 but only by 1.4 percent instead of the previously expected 2.7 percent.
On the plus said that is $3.5 trillion spent on IT this year but billions have been shaved off the potential amount because of ongoing issues around the dollar.
John-David Lovelock, research vice president at Gartner said that the strong U.S. dollar has cut $67 billion from our 2017 IT spending forecast.
“We expect these currency headwinds to be a drag on earnings of U.S.-based multinational IT vendors through 2017.”
The big US firms have already been forced to react to exchange rates with price rises and the chance of more problems will not be welcome to resellers or users.
Gartner is hoping that with the benefit of its warnings the industry can deal with the challenges and try to mitigate some of the impact.
The move away from physical servers towards hosted cloud services is not really helping much. The trend is helping the data centre market return to growth after being in a negative position in 2016, but it is hitting some of the established hardware brands.
“Enterprises are moving away from buying servers from the traditional vendors and instead renting server power in the cloud from companies such as Amazon, Google and Microsoft. This has created a reduction in spending on servers which is impacting the overall data center system segment,” said Lovelock.
Breaking down the forecast further there will be a dip in IT services, coming in at 2.3 percent in 2017, compared to 3.6 percent a year earlier.
On the hardware front the tablet demand will continue to wane but those selling Windows 10 business PCs will continue to enjoy growth as more customers invest in that technology.
The cocaine nose jobs of Wall Street clutched the spaces where their hearts should be after the search engine Google announced that its revenue growth had been stalled by the strong US dollar.
Google’s revenue grew 15 percent in the fourth quarter but fell short of Wall Street’s target thanks to declining online ad prices and unfavorable foreign exchange rates.
The outfit appears to be losing ground to Facebook on the advertising front. Facebook reported on Wednesday that mobile ads on its network doubled year-over-year during the fourth quarter.
Google said the “cost per click,” decreased 3 percent year-over-year in the fourth quarter, while the number of consumer clicks on its ads increased 14 percent.
Analysts had expected gains in cost-per-click and they are now saying that Google’s business is slowing and it is going to look worse as the dollar strengthens.
Consolidated revenue in the three months ended Dec. 31 totalled $18.10 billion, compared to $15.71 billion in the year-ago period. Wall Street expected revenue of $18.46 billon.
Chief Financial Officer Patrick Pichette said in a statement that revenue grew “despite strong currency headwinds”.
Net income rose to $4.76 billion from $3.38 billion a year earlier.
Software giant Microsoft reported a fall in its quarterly profit as sluggish PC sales dampened demand for Windows software and the company struggled with the impact of the strong US dollar.
Shares of the world’s largest software company, which have surged to 14-year highs in the past few months, fell three percent.
The fall did not seem to faze the cocaine nose jobs of Wall Street who seemed to be expecting it. Not much can really stand up to a high dollar pressure and most thought the numbers were good enough.
Microsoft’s flagship Windows business has been under pressure for three years as PC sales have declined, although the market appears to be stabilising in recent months.
Currency shifts against the strong U.S. dollar also crimped profit in the fiscal second quarter, ended December 31, although Microsoft did not specify by how much. Microsoft gets almost three-quarters of its revenue from overseas, but a significant amount of that is still in US dollars.
Commercial licensing is chiefly sales of Windows and Office to business customers, which is Microsoft’s biggest revenue generator.
Microsoft reported profit of $5.86 billion for the latest quarter, compared with $6.56 billion last year.
Sales rose eight percent to $26.47 billion, largely due to the acquisition of Nokia’s phone handset business last year.
Analysts had expected revenue of $26.3 billion including some restructuring costs.
Top tech companies are being called to task by an Australian committee that argues the country is getting a raw deal by unfair price discrimination.
Aussie MP Ed Husic moaned to the Australian that by some estimates, prices for Australia can be 60 percent more than in the States. He and the committee will be putting Apple, Microsoft and Adobe on 22 March, according to the BBC. Although the firms have replied in writing, until now they have not bothered to meet any representatives in person.
Although price differences aren’t as drastic in the USA and the UK, there is still a gap – with the only difference usually being in pound sterling rather than the dollar. Depending on what action the committee takes, there is the potential to set the bar on international price differences, and whether they should be altered in line with currency values.
Husic told the Australian that, considering IT is so widely used in both business and consumer segments, prices for hardware and software can “have a major commercial and economic impact”. He said that bringing IT prices down and “easing the bite of price discrimination” should be an “important micro-economic priority”. Of course, convincing conglomerates that tinkering with their margins is a good idea will be easier said than done.
The bigger picture, however, will be that if pricing is more competitive, consumers and businesses won’t hesitates as much to buy – even in challenging economic conditions.