3 big cap software winners
Posted
Aug 27 2009, 03:42 PM
by
Tobin Smith
Rating:
I've long believed that the key to a coming economic recovery won't be found on the consumer front. Instead, it's the all-important corporate spending side of the equation that needs to improve before we can begin to really call an end to the "Great Recession."
Fortunately, that improvement in corporate spending may well be taking place -- albeit at a slower pace than in recent past. All this means good news for some of the most stalwart corporate software vendors, including Microsoft (MSFT), IBM (IBM) and SAP (SAP).
Bing: More on corporate software spending
According to the latest ChangeWave Alliance Research Network corporate software survey, business purchasing continues to improve even as the pace of the recovery slows. To put it another way, we are seeing an uptick in planned spending for the next 90 days, but that upward trend is not as pronounced as the rate of improvement we saw back in April.
Three Sectors of Improvement
The very good news for the corporate software space at large is that our latest measure marks the third software purchasing survey in a row where we are seeing clear signs of improvement. Particularly strong were software segments such as virtualization, data storage and business intelligence.
The survey showed that better than one-in-ten buyers (12%) now say their company will spend more on software over the next 90 days, which is slightly better than in our April survey. Just 22% still say they'll spend less, a significant improvement over the April survey, the best reading in 18 months.
In another positive for the corporate software sector, the current survey marks the second consecutive survey where we are witnessing an upswing in corporate capital budgets. A total of 9% of respondents say their capital budget has actually increased over the past 90 days, a big improvement from the April measure. Just 30% say their capital budget has adjusted lower. This is a strong improvement over the April measure, and an extreme improvement from the survey conducted at the beginning of 2009.
So, what about individual software vendors? Which companies are experiencing the biggest growth surge?
Mister Softie's Resurgence
The surprise here for me is that at the vendor level, some of the biggest and most stalwart names are showing the biggest signs of strength. Software behemoth Microsoft is showing strong positive momentum among proposed software purchasers. This increased in proposed Microsoft buyers is almost certainly due to the upcoming Oct. 22 release of the company's new Windows 7 Operating System. (Microsoft publishes MSN Money.)
A recent ChangeWave corporate PC survey of Windows 7 beta testers points to relatively high satisfaction levels for Windows 7. Combined with the information we've seen in the corporate software survey, we could be looking at a major sales boost for Microsoft this fall, and that could lead to improved profitability for the software giant in the final quarter of the year.
More Winners -- IBM, SAP
Two other companies showing strong momentum are IBM and SAP, both giant corporate data base and enterprise software providers. What these findings suggest to me is that at least at this stage of the business cycle, it's the big boys that are outperforming their smaller brethren.
Now to be certain, I am not recommending Microsoft, IBM or SAP shares at this time. But I do have all three on my watch list as potential leading indicators that could signal a resurgence in corporate spending, and hence a real resurgence in the economy at large.
At the time of this writing, Tobin Smith did not own shares of MSFT, IBM or SAP in personal or client portfolios.
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