Aberdeen's analysis of the Q4 2002 financial results for the top 20 information technology suppliers indicates an increase in year-over-year revenues of 1.2%. Several of Aberdeen's benchmark
groups for selected IT subsegments showed negative growth. From a distance, this trend might be alarming. There are, however, several rays of light that shone through in Q4 of 2002.
Top 20 IT Companies: Flat Growth in Q4
Aberdeen tracks quarterly financial data for a benchmark group of the 20 largest publicly traded IT suppliers. This group consists of hardware, software, and/or IT services companies. The results for Q4 2002 performance, gathered as
of February 25, reveal the following:
Sequential quarterly revenues increased 9.5% over Q3 2002.
It is important to note that quarterly revenues follow a seasonal pattern and that the increase from Q3 to Q4 is in line with previous years. When looking at results for year-over-year revenues, Aberdeen discovered that a more
interesting and significant result emerges (Figure 1). Q3 of 2001 saw the bottom of the IT crater with -12.3% growth. A small increase of 1.2% in overall revenues is a positive sign and in line with a tepid recovery. Aberdeen attributes this result
to the fact that, barring a significant surge in GDP and capital spending, IT suppliers' revenues will not see a significant uptick. Aberdeen points to the significant price compression that is a hallmark of the current IT industry as one of the
chief drivers of this trend.
This recent quarter's results, in fact, point to another important trend. As Aberdeen has stated before, the IT industry has fallen closer to being in line with GDP growth, a sign of a maturing market. As the overall economy
struggles to get out of the doldrums, the IT industry shows signs of doing the same.
Furthermore, IT spending will not be uniformly negative or positive across all sectors. Aberdeen points to several benchmark groups representing individual IT sectors to demonstrate this fact. The Q4 results of these groups are
outlined below. It should be noted that, unless otherwise stated, all figures are for year-over-year performance, not sequential results.
Q4 2002 showed a decline in revenues of 3.5% for Aberdeen's benchmark group of 20 enterprise application software vendors. License revenues dropped 1.3% for Q4, with service revenues dropping 2.7%. The customer relationship
management (CRM) application market (a subset of the entire enterprise application market) continued its decline. The benchmark group for CRM exhibited a total quarterly revenue decline of 8.7%.
Top 20 IT Suppliers' Year-over-Year Quarterly Growth, 1998-2002
Quarterly Year-over-Year Growth for Benchmark Companies by Sector
Aberdeen tracks two additional benchmark groups that consist of software infrastructure suppliers: security and enterprise application integration (EAI). The security benchmark group's revenue growth remained in the double digits.
Quarterly revenues for this group of 28 companies increased 11.1% in Q4. This result is a slight decrease using the same metric for Q3 2002, during which revenues increased 12.8%. For the 17 publicly traded companies in Aberdeen's EAI benchmark
group, quarterly revenues declined 6.5% in Q3 2002. Although negative, this result is an improvement over Q3 2002, during which revenues declined 18.6%. Again, Aberdeen's September 2002 user buying intentions report indicated that IT buyers had a
low priority of purchase in this category.
The Q4 2002 revenue figures for Aberdeen's benchmark groups show mixed results. Although some of the results are disheartening, Aberdeen believes that overall they are in line with a tepid recovery.
There are two key themes finding continuous support in Aberdeen's research related to IT spending. Continued pressure on suppliers has caused a price deflation in IT products and services that continues to affect IT suppliers bottom
lines. Second, given reduced growth, suppliers will continue to trim expense as they look to improve profitability.
Hugh Bishop and James Tsai