Credit Suisse Report on IT

Credit Suisse has released a report on the current and future status of IT. (Click here to access the report: CS IT Hardware). It’s a bit long, but worth a skim for sure. I think there is some interesting insights (one glaring flaw is the failure to mention information governance- I guess we all can’t be perfect). Some of the key findings:

From Cyclical to Structural Growth
Based on an extensive study of end demand for the IT hardware and IT services sector, we see the $1.2tn market growing 4% per annum through 2015. Our analysis suggests that IT is being under consumed by the global economy when we look at levels of net tech investment, especially given the healthy corporate backdrop. Such underinvestment comes at a time when we believe IT infrastructure needs to cope with the megatrends of virtualization, move toward cloud computing, and explosive growth in smart devices, including smartphones and tablets. Given the above and sector valuations, we initiate coverage of the sector at Overweight.

PCs forecasting: Think Compute; Tablets a $120bn Opportunity
We have developed what we believe is the first econometric model for projecting computing demand. When combined with our commercial PC model, we conclude that installed base for computing products will rise to 2.4bn by 2015, driven by a high elasticity of demand and resulting in 14% unit and 4% revenue growth long term. Our proprietary PC price tier analysis suggests tablet unit volumes of 65mn/116mn in 2011/12 and long-term revenue of $120bn which represents 42%/42% of overall PC industry volumes/value.

Smartphones, Storage, and Services Driving the Market, while Traditional PCs and Printing and Servers Face Headwinds.
Beyond tablets, we see healthy 14% revenue growth within smartphones (we are again raising our estimates), 10% revenue growth in networked storage, and 5% revenue growth in services. By contrast, we expect the PC industry excluding tablets to decline 6%, printing (hardware and supplies) to remain flat, and servers to decline 2% long term (through 2015).

Table of Contents

Serving the Smart Era
Ten Themes for the Next Five Years
1) Cyclical Tailwinds for Now, Structurally 4% Growth
2) Compute Demand Drives Tablets to $120bn Market
3) Smartphones Set to Cross 1bn Unit Mark by 2015
4) Storage Has Several Secular Growth Drivers
5) Services Set for a Gradual Recovery
6) Lackluster Outlook—Servers, Traditional PCs, Printing
7) Radical Changes to the PC Value Chain?
8) Competition for the Datacenter… Heating Up
9) M&A—Sector Is Ripe for Continued Consolidation
10) The Cloud May Not Be That Incremental
Macro Trends Supportive of Tech
Get Your Head in the Clouds
PCs Disruption Coming
PC—Winners and Losers
Smartphone Growth to Continue
Smartphones—Winners and Losers
IT Services—2011 Shows a Gradual Recovery
Storage—Secular Growth
Storage – Winners and Losers
Servers—Anemic Growth Ahead
Servers – Winners and Losers
Printing—Secular Challenges

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