As we enter the heart of 1Q earnings season we like to look at how expectations are currently set for the year.
Based on a group of 219 mostly US-listed companies with over $1B of annual revenues the expected technology revenue growth this year is currently 5.9%. [The aggregated figures are $2.27T growing to $2.41T YoY.]
This figure is consistent with 2.2% expected GDP growth (the rule of thumb is about 3x GDP for technology spending.) It also lines up with expected growth in capital spending this year of 5.6%.
It comes as no surprise that Apple $AAPL is the big projected winner – growing 30% and generating nearly $38B in additional revenue. It’s fairly stunning to what extent the growth in the mobile has *not* been a tide lifting all boats. For Research in Motion $RIMM and Nokia $NOK they are not only losing share but actually shrinking. Using a 2x growth rate for mobile versus traditional IT spend it suggests that about $14B of incremental revenue for Apple this year is coming out of the hides of those two previous market leaders.
The other big revenue bump is coming from a recovery at the disk driver makers, Western Digital $WDC and Seagate $STX. They are projected to grow at a blistering 70% this year and add nearly $15B to the collective top line of the technology business.
Most surveys we have seen and discussions we’ve had point to a general tone of business that is “slightly less growth than last year where there was some catch-up spending but still fairly strong.”
As we have noted elsewhere spending on specific areas like information security, cloud/virtualization and mobile continue to remain above average after a strong 2011. As we go through earnings season we will “peel the onion” further in terms of annual growth expectations by sector, combine it more with valuation and also run a similar analysis on the “mittelstand” of the technology industry.