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UBS Sees Weaker 2013 IT Spending, but Certain Stocks Look Promising (UBS, DELL, EMC, NTAP, IBM, HPQ, ORCL, RIMM, CSCO, JNPR, ARUN, MSFT, VMW, SAP, ACN, INFY, QQQ, IYM)
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After a solid year for information technology spending by major corporations in 2012, companies surveyed by analysts at UBS A.G. (NYSE: UBS) suggest that spending will decline in 2013. In fact estimates have dropped to growth of 4.4% over the next 12 months from 7.6% as recently as third quarter last year. Despite this slowdown, and with no snapback seen in spending in 2013, which stocks are poised to succeed?
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In hardware, both Dell Inc. (NASDAQ: DELL) and storage giant EMC Corp. (NYSE: EMC) have gained share over the past six months. NetApp Inc. (NASDAQ: NTAP), International Business Machines Corp. (NYSE: IBM), Hewlett-Packard Co. (NYSE: HPQ) and Oracle Corp. (NASDAQ: ORCL) all appeared to be treading water at best.
More than 70% of chief information officers (CIO) surveyed by UBS indicated that they would be deploying tablets, and 66% said this would come at the expense of personal computers (PCs), a trend not positive for Dell and Hewlett-Packard. But the biggest hit may come in the mobility segment, where Research In Motion Ltd.’s (NASDAQ: RIMM) once dominant position in enterprise has shrunk to just 15% as the preferred mobile device solution.
The one bright area is networking. Spending plans at companies strongly favor Cisco Systems Inc (NASDAQ: CSCO). In fact 42% of CIOs surveyed said they intended to spend more this year, while only 8% said spending would be less. This may also benefit Juniper Networks Inc (NYSE: JNPR) and Aruba Networks Inc. (NASDAQ: ARUN). Most companies cited network security as their top priority going forward.
In the software segment, CIOs rated Microsoft Corp. (NASDAQ: MSFT), VMware Inc. (NYSE: VMW) and SAP A.G. (NYSE: SAP) as the companies that will receive the highest amount of spending.
Lastly in services, which is an area many large corporations have migrated to, they see IBM, Accenture PLC (NYSE: ACN) and Infosys Ltd. (NYSE: INFY) as beneficiaries of the highest amount of net spending.
It is not surprising to see large technology dominating the spending plans of companies in 2013. One good investment idea may be to purchase a technology exchange-traded fund (ETF). While many investors prefer the Powershares Nasdaq 100 ETF (NASDAQ: QQQ), it is not a pure technology play, with 30% of the holdings in other sectors. One good alternative may be the iShares Dow Jones U.S. Technology ETF (NYSEMKT: IYM).
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