Tuesday January 10, 2012
by Standard & Poor's The Outlook
The new year marks as good occasion as any for updating portfolios to reflect expected market conditions in the year ahead. Here, our equity analysts have compiled a list of predictions for the Information Technology sector for 2012.
We think the semiconductor segment will witness a strong sequential rebound in orders during the first three quarters of 2012.
We see the introduction of “ultrabook” laptops and the release of Windows 8 as catalysts for the industry. Conversely, we think the semiconductor equipment segment will experience a 10% decline in capital spending for 2012.
We expect both Intel (INTC) and Taiwan Semiconductor (TSM) to constrain capital spending somewhat following a strong 2011.
Nonetheless, we see demand bottoming following recent declines in sequential orders of more than 40%.
We predict that Google (GOOG) will complete the acquisition of Motorola Mobility (MMI), but will still have some Android-driven challenges to deal
In the software area, we foresee Microsoft (MSFT) releasing Windows 8 next year, and we think the anticipation, reviews, and early results will be favorable.
We also think Take-Two Interactive (TTWO) will release the highly anticipated update to its Grand Theft Auto series next year.
In terms of IT services, we think companies with high levels of revenue exposure to the U.S. federal government will struggle in 2012.
We foresee above-normal levels of gridlock ahead of the presidential election. Companies that have exposure to the federal government include Computer Sciences (CSC) and Unisys (UIS).
As for the Internet, we expect Facebook to begin the process of an initial public offer in 2012 and Yahoo (YHOO) to move towards going private.
We expect considerable merger and acquisitions activity involving companies large and small, public and private, domestic and international.
Learn more about this financial newsletter at S&P's The Outlook.