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Tech weak in 2002
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November 12, 2001: 7:00 a.m. ET
Most of the sector will struggle, but wireless, software should gain.
By Richard Richtmyer
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LAS VEGAS (CNN/Money) - After capping off one of its worst years on record, the information technology business is likely to struggle again in 2002, but there will be pockets of growth and opportunity, spurred in part by growing concerns about security, analysts and investors said at the industry's annual Comdex show here.
The personal computer and semiconductor industries, where already slack demand and pricing pressure has been exacerbated by declines in consumer confidence, are among those that will the hardest hit and the slowest to recover. At the same time, the software industry as a whole, and certain segments in particular, appear to be among the most resilient.
By far, the chip industry will be the worst performing segment, logging a 35 percent sales drop compared with last year, according to Crawford DelPrete, an analyst at high-tech research firm International Data Corp.
In 2002, DelPrete said, IDC is forecasting a 10 percent decline, with the industry returning to growth in 2003. Among chipmakers, DelPrete said those that specialize in chips used in mobile phones and other wireless communications devices are most likely to lead the upturn.
"Wireless will be the rebound," he said.
As for PCs, IDC is forecasting a 14.2 percent year-over year decline in 2001, and then another 7.5 percent decline in 2002, according to DelPrete.
The entire hardware sector, which includes other items such as data-storage, servers, and telecommunications equipment, is expected to show a 9.2 percent decline this year and a 1.3 percent decline in 2002. In 2003, the hardware sector as a whole is likely to log a year-over-year gain of 6.6 percent, by IDC's count.
The firm's latest market projections came after it re-evaluated its previous assumptions for industry growth made before the Sept. 11 attacks, which have had an impact on the economy and corporate spending that so far has been difficult to quantify.
Prior to Sept. 11, DelPrete said IDC had seen the IT industry slipping, but at the same time, had forecast corporate IT budgets growing in 2002. Its latest forecasts factored those previous assumptions in as a "best case scenario," but at the same time take into account a possible "worst case," he said.
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But IDC's industry outlook for this year and next is not all negative. The firm is expecting the software segment actually to grow this year, albeit modestly, and more robustly in 2002.
By IDC's count, software sales should grow about 1.1 percent this year and 5.6 percent next year. Much of the growth is expected from big investments in software used to enhance security, DelPrete said.
Indeed, it was in that area where venture capital firm Hummer Winblad Venture Partners made its sole investment this year, according to Mark Gorenberg, one of the firm's partners. He listed infrastructure management, which includes security software, on a short list of areas that show the best growth potential.
The firm invests exclusively in software companies. Another area where there will be potential for growth is software companies that specialize in mobile devices, as they become a more important part of corporate enterprises, Gorenberg said adding chipmakers that specialize in this area have strong potential as well.
"Semiconductor and software companies will be the new innovators in mobile," he said. 
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