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By Matthew Quinn
After two years of declines, the information technology sector is ready to grow again, according to a report published Monday by Forrester Research.
"The tech downturn of 2008 to 2009 is unofficially over," wrote analysts led by Andrew Bartels.
The firm forecasts that the U.S. IT market will grow by 6.6 percent in 2010 after falling 8.2 percent last year. Globally, the market will rise 8.1 percent in U.S. dollars and by 5.6 percent in local currencies.
Growth will start slowly in 2010 but pick up steam later in the year, Forrester said. Computer equipment (especially PCs and storage) and software will lead the way, followed by IT consulting services, as corporate clients finally make investments they had put off during the economic downturn. Communications equipment purchases will be uneven, and IT outsourcing will see moderate growth.
Such an optimistic outlook is expected to make the tech sector an M&A hotspot.
A survey released last week by IT research firm 451 Group found that 68 percent of respondents expected their firms to pick up the pace of M&A in 2010. That represents a substantial change in sentiment among the corporate buyers from last year's survey when only 44 percent said they expected a pickup in deal making. Additionally, last year's survey showed 23 percent of the respondents expected to slow their acquisition activity, compared to 5 percent in the most recent.
Spending on deals dropped to its lowest level in six years in 2009, slumping to $155 billion, 451 Group said. That's half the level it was in 2008 and just a quarter of the annual totals during the boom years of 2006 and 2007. Still, the year finished strong with fourth-quarter spending surging 45 percent from a year earlier and hitting its highest level in six quarters.
Executives expect substantial competition for deals, which in turn will push up valuations. More than half (58 percent) said valuations for private tech companies would increase over the next 12 months. Just 6 percent projected a decline in valuations.
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