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A slowdown in IT spending will lead to hard times ahead for technology firms, according to Merrill Lynch.

The investment bank polled 50 US and 20 European IT
heads and extrapolated an IT budget growth-rate in the US of just five per cent in 2001 (2000: up 11 per cent), the FT reports.

Europe is in somewhat better shape, with IT budgets this year projected to rise by 13 per cent, almost matching the run-rate in 2000 of 14 per cent.

As previously reported concerns about a slowdown in spending have led analysts to project lower sales for technology leaders such as Intel, IBM, Dell and Cisco.

Spending on IT services in particular is expected to be weakest, with growth of eight per cent this year. In previous years spending in this area has gone through the roof through Year 2000 compliance work and it's ironic that this sector is showing something of a slowdown just as the Millennium Bug is finally beginning to bite.

Areas of particular growth include software (where spending may grow 19 per cent), hardware and staffing costs. Top of the buying list is Windows 2000, the Merrill Lynch survey reveals. ®

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