Economic recovery starts on the ground. So, while it's nice to hear the likes of Stephen Schwarzman celebrate the return of IPOs and hefty exit strategies, the real indications that the economy is turning the corner will come when companies start to open their wallets and spend.
After dealing with only the have-to-haves for a while now, companies can start to make the improvements they've been putting off. Dell (NASDAQ: DELL) CEO Michael Dell sees this happening in the IT space, with companies expected to ramp up their hardware spending aggressively.
Of course, you wouldn't expect Dell to say anything else -- IT spending favors his company. But, his belief has the added benefit of making sense. According to Reuters, Dell said at a forum in Silicon Valley on Tuesday, "It's getting a bit better incrementally ... but I think there are still challenges out there." He continued, "The U.S. is doing a bit better than Europe; Europe's probably six to nine months behind the U.S." Upgrades to aging equipment will begin early next year, he says, and the refresh cycle on servers is already in progress and more robust than anticipated -- thanks in part to Intel's (NASDAQ: INTC) Nehalem processor.
Around 80% of Dell's revenue comes from businesses and organizations (i.e., not individual consumers), and 60% is from PC sales. The recession has cut spending by these organizations, with PC sales hit particularly hard because companies could put off upgrades and get by with what they had on hand. Hewlett-Packard (NYSE: HPQ), which has a more balanced collection of revenue streams, hasn't been hurt as badly.
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