Larry Dignan (
Goldman Sachs delivered its 2010 outlook for the software sector
on a conference call Monday and it boils down like this: PC and
servers will see a big upgrade cycle; mergers and acquisitions will
be used by big companies looking to boost cash reserves; and
there's a continued march toward cloud computing.
Overall, Goldman sees IT spending in 2010 to rebound 5 percent
in 2010 from a decline of 8 percent in 2009.
From an investment perspective, Goldman reported that fourth
quarter estimates for technology companies are likely to be low.
Pent up demand is there for storage, PCs and servers in that
Among the key points:
- Red Hat (
) and VMware (
) are likely to gain the most from a PC and server upgrade
- Microsoft (
) will roll with small and mid-sized business growth. Here's the
- The cloud will take shape. By 2013, IT cloud services
application revenue will represent the largest portion of a $44.2
billion revenue pie, but face slowing growth. Storage cloud
services will be the fastest growing market. In 2009, IT cloud
revenue will be $17.4 billion, according to Goldman, which also
had a handy graphic on the cloud layers.
- 2010 will begin the rise of the virtual desktop. Goldman sees
) being the lead dog to this virtual desktop move with VMware
being a major player. Goldman sees virtualized desktops being a
$1.3 billion to $2 billion market by 2013 with Citrix and VMware
owning 90 percent of the market. The caveat here: We've heard
this before and companies seem skeptical about virtualized
- Merger and acquisitions in the software industry will be the
norm. BMC Software (
), Citrix, McAfee (
), Nuance (
), Red Hat, Salesforce.com (
), Symantec (
) and VMware are among the companies expected to benefit from
consolidation. The big consolidators are expected to be the usual
suspects: IBM (
), HP (
), Cisco (
), Oracle (
) and EMC (
). Here's the breakdown:
- IBM is shopping for middleware (think Tibco (
), Red Hat), datacenter automation (
), virtualization (Citrix) and project lifecycle management
- Cisco is shopping for datacenter automation and
- HP wants to buy middleware, security, storage management and
- Oracle is shopping for applications, middleware and data
center automation companies.
- EMC and Symantec are also eyeing data center automation
The common thread here is that you may want to buy shares of BMC
Software, which could be the belle of the merger ball.
Wild cards for 2010 include SMBs, which may not recover until
2011. Emerging market demand is also unknown.
Hedge Fund Blue Ridge's Largest Positions: Apple
and JP Morgan