Tech Revival Fueled by Sales to Government

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More on the lack of true demand from the corporate sector:

“The recent pickup in spending on networking equipment – the routers and switches that move information across the Internet and private networks – may be less impressive than it first appears.

In the last few months, Cisco Systems and other networking companies have reported big gains in their sales and profits, fueling a revival in technology stocks. But government spending has accounted for a substantial share of the growth, not corporate investment, according to stock analysts and the companies themselves.

And the growth in government technology spending is leveling off. The president’s proposed budget for the 2005 fiscal year projects technology spending at $59.8 billion, a rise of 1 percent from 2004. So only an increase in corporate technology spending can generate the growth that investors in Cisco and other networking companies appear to be expecting.

In the last six months, Cisco’s sales to the federal government have grown more than twice as fast as its sales to private companies . . .”

Source:
Tech Revival Fueled by Sales to Government
Alex Berenson
NYTimes , March 2, 2004
http://www.nytimes.com/2004/03/02/business/02place.html

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