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European IT firms still feel spending pinch

BARCELONA (Reuters) - European IT vendors are not getting much help from economic recovery, with clients still very cautious in their investments, company executives said on Wednesday.

“We probably are going to see quicker improvement in the investment climate in the Americas, in emerging countries,” said Thibault de Tersant, finance director of French software company Dassault Systemes.

Dassault gets a large chunk of its revenue from the automotive, aerospace and heavy engineering sectors. It is a leader in three-dimensional computer design software.

“Investment guidance in companies is still very prudent, very cautious,” Leo Apotheker, chief executive of German business software company SAP, told Morgan Stanley’s annual Technology, Media and Telecoms Conference in Barcelona.

The euro zone shook off recession in the third quarter although the largely government-engineered rebound after more than a year of shrinkage fell a little short of forecast, latest data showed.

Shares in many IT companies have rallied this year, boosted by companies’ aggressive cost cuts and growth from acquisitions, but the sector in many countries is still looking for actual uptick in demand.

“It is unlikely we will see any major shift in capital expenditure for IT until 2011 given the softness of major markets like the U.S., UK, Germany, and Japan given indicators like low consumer sentiment and the down market for housing,” said Steven Nathasingh, Chief Executive of research firm Vaxa.


French IT consultancy and outsourcing group Steria, which also has a strong presence in Britain and Germany, said it did not expect to see an uptick in demand over the next few months.

“I consider the situation will remain more or less the same,” said Steria Chief Executive Francois Enaud.

Spanish IT company Indra echoed the comment, saying the decision-making of clients was still taking a long time.

“Customers are very lazy making decisions, projects remain in the pipeline for a very long time,” Finance Director Juan Carlos Baena said, adding: “We do not foresee a catalyst for growth in 2010, especially in the defence and public sectors”.

Spain’s recession stretched into its fifth quarter in the July-to-September period, data showed on Wednesday, as the economy showed few signs of returning to growth.

Last week Indra -- which gets two thirds of its sales from Spain -- said nine-month net profit rose 8 percent to 152 million euros ($228 million), while sales, boosted by international business, rose 6 percent to 1.88 billion.

(Reporting by Tarmo Virki; Editing by Dan Lalor and Jon Loades-Carter)

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