May 15th, 2009

Companies in the US have finally stopped cutting information-technology budgets after reducing their spending sharply for several months, and the change is likely to cease revenue falls at technology companies like Hewlett-Packard Co and Cisco Systems Inc.

Forrester Researchspending said that spending on computer hardware, software and services used to be the fastest-growing segments of the economy, which climbed by 9% in 2006 and 13% in 2007.

Yet, the increase in corporate technology spending, which is the main source of revenue for tech giants like  International Business Machines Corp, Dell Inc and Oracle Corp, dropped to 8% in 2008, and it is expected to decline 3% in 2009.

It seems that the shift toward stability will not emerge when H-P and Dell report quarterly earnings over the next two weeks. The two companies are expected to announce declines in profit and revenue from a year earlier. But interviews with more than a dozen chief information officers and corporate technology executives who oversee tech spending indicate that a range of US companies have stopped reducing.

Anyway, the viewpoint is better. The IT department at Notre Dame University was told earlier this year to prepare three budgets for fiscal 2010, which begins in July. One cut the $25 million IT budget 5%, another cut it 2%, and the third built in a 2% increase.

Verizon Communications Inc and Frontier Communications Corp have signed an agreement concerning the sale and purcase of local phone services in 14 states for US$8.6 billion, in which Verizon  agreed to sell the local phone services to Frontier at the said price.

Verizon said the purchase is meant to focus on markets that are more suitable to the company’s fiber-optic services. It also said that the transaction allows the company to drop 4.8 million rural phone lines and transfer 11,000 workers to Frontier, which provides phone services in small towns and rural areas. Verizon said it will triple the size of Frontier.

Verizon also said that the company is satisfied with its remaining landline markets and does not anticipate additional sales. Once the deal closes, Verizon will have approximately 30 million access lines in the US Frontier will have seven million lines.

Frontier pays $5.3 billion in stock, with Verizon shareholders receiving one Frontier share for every 4.2 shares of Verizon stock, leaving them with about 68% ownership of the combined company.

Besides, Frontier will also contribute cash after raising about $3.2 billion through a new debt offering, and will assume a small amount of Verizon debt.

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The US Commerce Department said retail sales data was disappointing as the figure dropped 0.4%  in April from March, which included a 2.8% decline in sales at electronics and appliance stores.

The figure is worse than any other individual category because sales were down 12% on a year-over-year basis. In March, sales were down 7.8% sequentially for electronics stores, and 8.8% year over year.

Meanwhile, the Wall Street Journal said the 0.4% fall was considerably worse than the Wall Street expectations for a 0.1% increase in retail sales over the month before.

Possibly the year-over-year numbers for the electronics segment were likely hurt by the closing of Circuit City, some of their sales were no doubt absorbed by discount retailers like Wal-Mart (WMT) and warehouse club stores like Costco (COST).