MICROSOFT Corp, Cisco Systems Inc and computer makers may lose US$4.3 billion in orders next year as the credit crisis forces financial companies to cut spending to the lowest level since 2000.
Finance-industry technology outlays would sink 20 percent to US$17.6 billion next year from an estimated US$21.9 billion in 2008, Larry Tabb, founder of Tabb Group in New York, which tracks securities firm budgets, told Bloomberg News.
Lehman Brothers Holdings Inc's bankruptcy and Bank of America Corp's purchase of Merrill Lynch & Co mark the beginning of stark spending cuts amid plans for a US$700-billion government bailout for Wall Street. More than 20 percent of global technology spending came from the finance industry, said researcher Gartner Inc.
"This is game-changing," said Joanne Correia, an analyst at Connecticut-based Gartner. "People are going to stop new software deployments. They'll cut in the applications space. In PCs and servers, everyone will stop putting in new hardware."
Lehman's bankruptcy and the subsequent takeover of some units by Barclays Plc may reduce the firm's budget for computer spending to US$1 billion next year from US$2.5 billion as the London-based bank eliminated redundant systems, Tabb said.
The combination of Merrill with North Carolina-based Bank of America would bring US$1.5 billion to US$2 billion in technology-spending reductions, he said. While both had United States equity-processing systems, the firm would need only one, he said.
Remaining investment banks may pare asset securitization, he said. The process, pooling loans and converting them into packages of securities, is at the center of the mortgage and financial collapse as banks created risky financial products leading to more than US$500 billion in writedowns.
"It would make sense just to eliminate the technology and the resources that were used for these businesses," Tabb said on Thursday.
It was too soon to know what cuts Bank of America might make because the firms were still separate and no decisions had been made, spokesman Chris Feeney said. Barclays spokesman Peter Truell declined to comment.
"You're going to see a slowdown in some of that spending," John Hennessy, president of Stanford University and a director at Cisco and Google, said in San Francisco. "It's inevitable."
Technology spending slowed even before the financial crisis worsened over the past two weeks. Almost half of large companies have cut their budgets this year to cope with the slump, according to Forrester Research Inc in Cambridge, Massachusetts.
Sun Microsystems Inc and International Business Machines Corp may be twoof the companies with the most at risk, said Wachovia Capital Markets LLC analyst David Wong in New York.