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IT industry under a cloud, but it's blue sky ahead, says IDC

The bad news -- 2002 is expected to be the worst year ever for the worldwide information technology industry, which is expected to show a 2.3 percent slump.

The good news, according to a survey released on Wednesday by International Data Corp (IDC) -- the worst is over and high-tech industries will grow by more than 5 percent in 2003.

"Overall, the IT industry has contracted by roughly 3 percent over the past two years," said John Gantz, chief research officer at IDC, a high-tech research firm.

"This is in sharp contrast to the average annual growth rate of 12 percent enjoyed by the industry over the past 20 years. Looking forward to 2003, we expect to see spending on IT and communications resume, driving a worldwide growth rate of 5.8 percent for the industry," he said.

But IDC said that conditions are uncertain because of questions about a potential war in Iraq or other unknown events and for the first offered time an alternate "downside" forecast of 2 percent growth.

IDC cautioned that the US$875 billion worldwide industry is not yet out of the woods and cautioned against unrealistic expectations.

It said software spending will remain weak while price competition will inhibit revenue growth in the hardware sector. Services growth will also be held back.

Beyond 2003, IDC expects growth rates to improve for several years followed by slower growth later in the decade.

According to IDC, the hardest-hit segments were the systems market, including personal computers, servers and workstations, which slid 9.3 percent, while the worldwide storage market shrank by 10.6 percent.

The worldwide network equipment market experienced a 7.6 percent decline as sales to telecom service providers dropped sharply.

And the services market, which represents over one-third of total worldwide IT revenues, also underwent a dramatic decline as the average contract value fell to a three-year low, IDC said.
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