Specialized Bicycle Components Inc spends 35 percent less on computer hardware, software and labor than it did two years ago. Chief Information Officer Ron Pollard has no plans to change that.
The US economic slump forced the maker of mountain bikes to scale back. Specialized is making do with personal computers bought before the year 2000 date change, and Pollard said he no longer feels compelled to buy the latest programs, such as customer-relationship management software.
"If someone tells you that you need to implement CRM software today, you can hang up on them," Pollard said.
That's bad news for Siebel Systems Inc, the world's biggest maker of customer-service software, whose chief executive last week called the first quarter the worst in the history of the computer industry. International Business Machines Corp and PeopleSoft Inc earlier this month said results missed analysts' forecasts, walloping investors who were hoping for a recovery.
The long-awaited rebound in spending on computer hardware and software has been pushed out even further as companies wait for profits to pick up before they boost budgets, investors said.
Siebel Chief Executive Tom Siebel said he now expects a recovery in the third or fourth quarter. "The contraction is not over," Siebel told reporters at a luncheon in Madrid last week.
Investors will get more evidence this week as companies from IBM to Intel Corp and Microsoft Corp report earnings for the quarter ended in March.
Texas Instruments Inc, the world's largest maker of chips for cellular phones, and Unisys Corp, a seller of business computers and services, are forecast to report lower first-quarter sales.
First-quarter earnings for technology companies in the Standard & Poor's 500 Index fell 29 percent, the fifth straight quarter of declining profit, according to analysts surveyed by Thomson Financial/First Call. Profits are expected to rise 33 percent in the second quarter and 38 percent for the year.
Those estimates may be slashed in the next couple of weeks as companies report earnings and tell analysts to expect slower growth, said Owen Fitzpatrick, director of the US$7 billion US equity group at Deutsche Bank Private Banking.
Reduced forecasts "will be the predominant news we get," Fitzpatrick said.
Already, the NASDAQ Composite Index has dropped 9.9 percent this year, continuing a two-year slide. The index plunged 21 percent last year and 39 percent in 2000.
Software and hardware makers are waiting for companies like Specialized to open the spigot and start buying more.
"We'll be much more conservative," Specialized CIO Pollard said. "We don't need to react as fast."
The Morgan Hill, California-based company spends less than 3 percent of its US$220 million in annual sales on computer hardware, software and labor. The top priority now is implementing Oracle Corp software to allow the closely held company's 1,300 dealers to order bicycles on line, Pollard said.
Siebel, based in San Mateo, California, is expected to say today that first-quarter profit fell 20 percent and sales fell 18 percent, according to a First Call survey of analysts. Analysts expect Armonk, New York-based IBM to say earnings dropped 31 percent as sales fell 12 percent to US$18.5 billion.
IBM last week said profit trailed forecasts and sales missed analysts' estimates by US$1 billion in the first quarter. PeopleSoft said April 1 that software sales missed its own target by as much as US$30 million.
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