Fitch Rating view on IT Services sector in the US
SOURCE: MarketWatch
DATE: Dec 3rd, 2008
The Rating Outlook for a majority of U.S. information technology (IT) sectors is Negative for 2009 based on expectations that a reduction in global IT spending will weaken operating and credit profiles, according to Fitch Ratings.
Fitch’s outlook on the IT Services sector is stable compared to other sectors – hardware, semiconductors etc..
IT Services/Software (Stable Outlook):
Fitch’s Stable Outlook for the IT Services/Software industry reflects expectations for moderating, positive growth of 1%-3% in 2009 due to the recurring revenue stream and critical nature of services typically provided by long-term contracts, and the generally countercyclical nature of outsourcing. The prospect for decelerating IT services growth in 2009 relative to 2008 takes into account the susceptibility of short-term IT services projects viewed as discretionary in nature to be terminated or postponed in the weak current economic environment, which could also lead to greater pricing pressure in order to support staff utilization rates and vendor profitability. Some margin deterioration could also occur as customers seek to renegotiate maturing contracts at reduced terms, Fitch expects free cash flow to remain strong.
Fitch believes the economic turmoil will curtail revenue from short-term consulting, and development and integration projects in 2009, which in aggregate accounts for nearly 30% of the approximate $800 billion IT services market, according to Gartner. Furthermore, Fitch expects the total contract value of new commercial outsourcing awards in 2009 to face continued pressure from the financial services industry given the significant 38% decline experienced in the first nine months of 2008, which was more than offset by growth in manufacturing and telecom, according to Technology Partners International (TPI).
A list of Fitch-rated issuers and their current Issuer Default Ratings (IDRs) in the U.S. technology sector follows.
IT Services/Software:
–Accenture Ltd. (‘A+’; Outlook Stable);
–Affiliated Computer Services, Inc. (‘BB’; Outlook Stable);
–CA Inc. (‘BB+’; Outlook Positive);
–Computer Sciences Corp. (‘BBB+’; Outlook Stable);
–Convergys Corp. (‘BBB-’; Rating Watch Negative);
–International Business Machines Corp. (‘A+’; Outlook Stable);
–Microsoft Corp. (‘AA+’; Outlook Stable);
–Oracle Corp. (‘A’; Outlook Stable);
–SunGard Data Systems Inc. (‘B+’; Outlook Negative);
–Unisys Corp. (‘BB-’; Rating Watch Negative).
No relate
You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
