Tech Growth Expectations

by Kris_Tuttle on April 17, 2012

As we enter the heart of 1Q earn­ings sea­son we like to look at how expec­ta­tions are cur­rently set for the year.

Based on a group of 219 mostly US-listed com­pa­nies with over $1B of annual rev­enues the expected tech­nol­ogy rev­enue growth this year is cur­rently 5.9%. [The aggre­gated fig­ures are $2.27T grow­ing to $2.41T YoY.]

This fig­ure is con­sis­tent with 2.2% expected GDP growth (the rule of thumb is about 3x GDP for tech­nol­ogy spend­ing.) It also lines up with expected growth in cap­i­tal spend­ing this year of 5.6%.

It comes as no sur­prise that Apple $AAPL is the big pro­jected win­ner — grow­ing 30% and gen­er­at­ing nearly $38B in addi­tional rev­enue. It’s fairly stun­ning to what extent the growth in the mobile has *not* been a tide lift­ing all boats. For Research in Motion $RIMM and Nokia $NOK they are not only los­ing share but actu­ally shrink­ing. Using a 2x growth rate for mobile ver­sus tra­di­tional IT spend it sug­gests that about $14B of incre­men­tal rev­enue for Apple this year is com­ing out of the hides of those two pre­vi­ous mar­ket leaders.

The other big rev­enue bump is com­ing from a recov­ery at the disk dri­ver mak­ers, West­ern Dig­i­tal $WDC and Sea­gate $STX. They are pro­jected to grow at a blis­ter­ing 70% this year and add nearly $15B to the col­lec­tive top line of the tech­nol­ogy business.

Most sur­veys we have seen and dis­cus­sions we’ve had point to a gen­eral tone of busi­ness that is “slightly less growth than last year where there was some catch-up spend­ing but still fairly strong.”

As we have noted else­where spend­ing on spe­cific areas like infor­ma­tion secu­rity, cloud/virtualization and mobile con­tinue to remain above aver­age after a strong 2011. As we go through earn­ings sea­son we will “peel the onion” fur­ther in terms of annual growth expec­ta­tions by sec­tor, com­bine it more with val­u­a­tion and also run a sim­i­lar analy­sis on the “mit­tel­stand” of the tech­nol­ogy industry.

 

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