It isnt a huge growth rate - just 1.1 percent, according to the governments report last week on U.S. economic growth. Still, equipment and software are a broad and important category of items made by such companies as Deere & Co., EMC Corp. and General Electric Co. It includes computers, software, medical equipment, industrial engines, autos, planes, furniture and farm machinery.

Business spending is especially crucial now because consumers, who normally drive a recovery, arent doing so this time. Many shoppers are too squeezed by job losses, flat wages, tight credit and high debt.

The higher spending doesnt necessarily mean companies are swimming in cash. But in a twist on the Ant and the Grasshopper fable, some businesses managed to save enough during the recession to spend more now, analysts said. Others cant get loans to expand their plants and instead must upgrade the equipment they have, analysts said.

When businesses spend more on equipment, jobs can eventually be created at companies that make the machines and the parts that go into them.

Some makers of technology-related equipment see better business conditions. At EMC, which sells data storage machines and software, CEO Joe Tucci said he was starting to see customers become more comfortable with ramping up spending on information technology.

EMC said it expected a “slow but steady recovery.”

For now, though, most businesses are reluctant to hire. To meet any pickup in demand, theyre relying instead on workers they already have.

The economy isnt likely to create many jobs until a broad-based recovery has taken hold.

Edward Yardeni, president and chief investment strategist at Yardeni Research, predicts businesses will boost their spending on capital equipment at around a 10 percent annualized rate in the current October-to-December quarter. And he thinks it will continue rising after that as businesses revenue and profits improve.

For now, companies will probably focus spending on computers, software and other technology that can boost the productivity of their existing workers, he said.

The need to frequently upgrade their technology gives many businesses another reason to spend, Yardeni said.

Herb Goetschius, president of McNichols Co., a Florida maker of metal gratings and other products, said his revenue is starting to rise after customer demand “fell of a cliff” late last year and earlier this year.

Some companies he sells to are spending more to replace outdated equipment and also to maintain and repair existing plants and machines. All that is boosting his revenue.

“To maximize storage at existing plants, companies are building mezzanines instead of wasting the square footage,” Goetschius said. “We see our products used for that.”

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“Its an excellent financial operation,” Aurel BGC in Paris wrote in a note to investors. “It unifies the channels of distribution for large accounts and reinforces the partnership with IBM.”

The purchase will help the French company expand in the market for software used for designing industrial products. Velizy Villacoublay, France-based Dassault Systemes gets almost half of sales from automakers and aerospace companies including Toyota Motor Corp. and Boeing Co., which have suffered from the global economic slowdown. IBM has sold businesses as the global recession led corporations to scale back on technology spending.

“We now will have a well-integrated sales team to engage with our large and very large clients,” Dassault Systemes Chief Executive Officer Bernard Charles said on a conference call today. “We will work directly with an additional over 1,000 customers in aerospace, automotive, engineering, manufacturing, shipbuilding industries.”

Shares Advance

Dassault Systemes rose 7 percent to 40.92 euros at 9:29 a.m. in Paris, bringing its gain this year to 27 percent. IBM shares fell 0.2 percent to $120.11 in the U.S. yesterday.

Dassault Systemes Chief Financial Officer Thibault de Tersant said in February the company planned to seek acquisitions this year, using part of the 640 million euros ($953 million) of net cash it had on its balance sheet at the end of 2008.

The deal is Dassault Systemes biggest acquisition since it was founded in 1981, C.J. Lin, a Shanghai-based spokeswoman for the software maker, said by phone today.

The purchase “will be accretive on both operating margin and on earnings,” Charles said. “It will be accretive from 2010,” assuming the deal is completed on schedule, he said.

Dassault Systemes software is used to design products ranging from mobile phones to automobiles and passenger aircraft. They also allow manufacturers to simulate engineering problems, as well as plan production virtually by running tasks such as assembly simulation and modeling welding lines.

IBM Disposals

As part of the agreement, Dassault Systemes will be established as an IBM Global Alliance Partner. IBM and Dassault Systemes said they plan to continue to jointly invest in developing, deploying and supporting lifecycle management products for customers worldwide.

“Todays agreement positions both our companies for growth in the PLM space, allowing us to focus on our core competencies and better serve our clients,” Steve Mills, head of IBMs software division, said in the statement.

IBM sold its UniVerse and UniData businesses to Rocket Software earlier this month. The Armonk, New York-based company reported in October that signed services contracts, an indicator of future business, dropped 7 percent to $11.8 billion in the third quarter, the lowest level in six quarters.

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DVDs are embedded with anti-piracy technology that prevents copying, Patel noted.

“RealDVD products are designed primarily for circumvention of that technology,” she wrote. “This unauthorized access infringes the Studios rights because it entails accessing content without the authority of the copyright owner.”

Patels order bars the company from selling its software until the case is resolved, saying the movie industry is likely to prevail in its legal battle with RealNetworks.

The companys software - which costs $29.99 - allows consumers to copy DVDs to their computer hard drives.

RealNetworks has argued that buyers of DVDs have a fundamental right to make digital copies for safer and more convenient storage. The companys lawyers said the software contains piracy protections that limits a DVD owner to making just one copy.

But the studios said they have the legal right to retain complete control over how content theyve created is distributed.

The lawsuit has incurred widespread wrath from bloggers, digital rights advocates and groups on both sides of the political spectrum. Critics accuse the studios of stifling innovation.

The industry counters that it is trying to stamp out illegal piracy while it and partner companies develop legitimate copying software.

Patel initially barred sales of the software in October after the product was on the market for a few days. At the time, the judge said it appeared the software violated federal law against digital piracy, but ordered detailed court filings and a trial to better understand how RealDVD works.

The ruling was a big win for the industry and RealNetworks said it is considering its options. A trial has not been scheduled.

The industry feared an adverse ruling would legitimize so-called “rippers” - software that allows users to “rent, rip and return” movies instead of buying them, thus cutting into Hollywoods annual $20 billion DVD sales market. Such software is easy to obtain online, though it remains illegal.

“This is a victory for the creators and producers of motion pictures and television shows and for the rule of law in our digital economy,” said Dan Glickman, chairman and chief executive of the Motion Picture Association of America. “We are committed to advancing the consumer experience through technology while sustaining the creative community that makes the movies and TV shows we love.”

RealNetworks was disappointed with the injunction, but will review its options, company spokeswoman Kyrsa Dixon said.

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Still, Oracles chief financial officer, Jeff Epstein, said in a statement that Oracle executed “substantially better” than the company expected.

Oracle, which is based in Redwood Shores, Calif., said after the market closed Tuesday that its net income from March through May was $1.89 billion, or 38 cents per share. Last year, it was $2.04 billion, or 39 cents per share.

Excluding stock-based compensation and one-time items, Oracle said it earned 46 cents per share, which was 2 cents per share better than the average estimate of analysts polled by Thomson Reuters.

Sales fell to $6.86 billion, nearly $400 million better than the analyst estimate.

Sales of new software licenses fell 13 percent to $2.74 billion, indicating that Oracles customers are still being tightfisted about upgrading their computer systems with new programs. They still have to maintain their older software, though, and in most cases theyll pay Oracle to do it.

Oracles revenue from software license updates and product support bumped up 8 percent to $3.05 billion in the latest quarter. That segment made up 44 percent of Oracles overall revenue.

Oracle is the worlds leading maker of database software, and has been expanding aggressively into other areas, like business applications. Its even going to make hardware now, provided its $7.4 billion acquisition of server manufacturer Sun Microsystems Inc. goes through this summer as expected.

With the acquisition, Oracle will become more of a one-stop technology shop, like IBM Corp. and Hewlett-Packard Co.

Oracles stock was up 49 cents, or 2.5 percent, to $20.36 in after-hours trading. During the regular session, before the results were announced, Oracle shares closed down 10 cents at $19.87.

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“Partnering with leading IT companies like Microsoft will greatly boost Hangzhous innovative capabilities and help us build a model information technology city in China,” Cai Qi, Hangzhous mayor, said in a statement.

No dollar figure was announced for the plan. Spending will be above the roughly $1 billion the company pledged in November to spend on research and development in China over the following three years.

The deal came after Hangzhou pledged to improve its enforcement of anti-piracy laws and promote the use of legitimate, non-pirated software by individuals, government offices and companies based in the city, which is west of Shanghai.

Software, movie and music makers, among many industries, say they lose billions of dollars each year to counterfeited and pirated products.

The deal calls for the two sides to set up a working team from both sides that will hold regular meetings to assess progress in that area, Alec Cooper, general manager of Microsoft Greater Chinas “Genuine Software Initiative,” told reporters in a conference call.

“There is some degree of piracy in virtually every country around the world. We said, heres what we think are the best practices and heres what we think will work in China, and make it a more positive approach,” Cooper said.

He said the partnership will focus on educating local people and businesses on the importance of fighting piracy of software and other intellectual property to their own economic future.

“We think its an approach that addresses the root of the problem,” he said.

Raising consumer awareness was the motivation behind Microsofts Windows Genuine Advantage program, which turns the wallpaper of computers using pirated Windows software black and notifies users, urging them to get a legitimate copy.

That effort continues, Cooper said, despite complaints from some Chinese computer users.

Software piracy is still rampant despite individual countries attempts at cracking down. Research commissioned by the Business Software Alliance, an industry trade group, found that 82 percent of the software used in China in 2007 was not legitimately purchased, more than double the worldwide piracy rate of 38 percent.

“They understand that to get the best companies in the world to be located in Hangzhou … companies need to feel comfortable about their intellectual property,” Cooper said, adding that Microsoft may seek such arrangements with other cities in the future.

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But Wednesday marked the first time he had renewed that stance since the resignation announced this week by Yahoo CEO Jerry Yang, who had resisted Microsofts overtures. Yahoo shares rose when Yang said he would step aside, because investors hoped it meant a deal with Microsoft would now be more likely.

Ballmer said the companies are not currently talking about a search deal.

Yahoo shares plummeted $2.41, or 20.9 percent, to close at $9.14, its lowest level since early 2003, on a split-adjusted basis, and well below the $33 per share Microsoft offered in May. Microsoft shares tumbled $1.33 cents, 6.8 percent, to end the session at $18.29, a 10-year low.

Michael McDonald, a shareholder who flew from Atlanta to attend the meeting, blames Microsofts run at Yahoo for depressing its share price and hopes the software maker doesnt try again.

McDonald, a retired advertising executive, called the race to win in Web search and advertising “the dot-com bubble all over again. The economic period were in now is going to prove the questionable value of search.”

Instead, hed rather see Microsoft cut employees and expenses, or spend cash to buy business software companies.

“We dont need three Googles,” he said.

Some analysts have interpreted Ballmers public comments about a Yahoo buyout as negotiating posturing, and suspect Microsoft might still want to grab Yahoo at a low price, in hopes of improving their joint position in online search and advertising. However, analysts have also said Microsoft is likely to wait until next year before deciding, giving it time to watch Yahoos performance and study the antitrust regulatory climate in a new administration in Washington.

In his remarks, Ballmer attempted to reassure shareholders that Microsoft can thrive despite the economic downturn, citing the software makers long-term research and development spending and new products that mix desktop software and over-the-Internet computing.

When a shareholder, alluding to Microsofts languishing stock price, asked Ballmer when Microsofts best years would arrive, the CEO countered that every year is Microsofts best year.

Source: nyoni

“The main market for us is still the United States. If companies are not doing good there, our job prospects are low,” said Nilesh Raut, 29, a software engineer at Oracle, which has an office here.

Bangalore is full of young migrants like Raut, who snapped up tech jobs that paid more than their parents could dream of, and who, unlike their parents, made unabashed use of their credit cards. But now, as India’s biggest shopping season, Diwali, kicks off, many say that until they have a better sense of how far and how deep the current crisis will cut, they’ll stick to window shopping.

“We’re just here for the ambiance,” said Raut, strolling through Bangalore’s oldest mall, Forum, foreswearing the iPods, Lee jeans, Reebok shoes and Arrow shirts on offer.

Since it opened four years ago, Forum has seen annual sales growth average 25 percent a year, according to Merveil Varghese, the mall’s marketing manager. This year, she expects sales growth at the mall’s 72 shops to slow to 17 to 18 percent. Rents, which quadrupled during that time, have stabilized, she said.

“Fifty percent of our customers are from the IT crowd,” she said. But these days, “everybody is taking it a little cool. You can’t afford to raise prices.”

The mall was packed, but few people had shopping bags in their hands. Consumers have also been singed by stock market losses.

“It’s not just Wall Street. It’s Dalal Street,” said Mansi Aneja, 30, referring to the Bombay Stock Exchange, which has lost about half its value this year. She said she’s putting off buying a new car.

Dubbed the Silicon Valley of India, Bangalore and its environs account for a third of India’s software services exports, according to Som Mittal, chairman of Nasscom, an industry group.

The roots of the region’s tech boom can be traced back to India’s first prime minister, Jawaharlal Nehru, who decided to make it the hub of the newly independent nation’s defense industry, building research centers and engineering schools, according to N.R. Narayana Murti, one of Infosys’ founders and now chairman of its board.

“Nehru wanted to locate defense electronics and research away from the borders with China and Pakistan, in a place at least half an hour away from the oceans,” said Murti.

Infosys, which set up shop in Bangalore in 1982, and Wipro were among the first private sector arrivals, attracted by the good weather, strong education, and availability of property, Murti said. After economic reforms in the early 1990s opened the sector to foreign firms, companies like Microsoft Corp. and IBM Corp. piled in too, he said.

In the last five years, household incomes in Bangalore have grown at over 10 percent a year, according to the National Council of Applied Economic Research.

India’s IT firms derive 40 percent of their global revenues from financial services clients, with 61 percent of total sales from the U.S. and 30 percent from Europe. Some of India’s IT majors have already revised their sales growth forecasts for the year downwards by 5 to 6 percentage points.

However, Infosys, like other IT firms, is betting that short-term pain will give way to long term gains, as U.S. companies are forced to make deeper cost cuts and, potentially, outsource more work to India. Nandan Nilekani, co-chairman of Infosys, says Bangalore’s torrid growth may slow in the short-term, but the dream will not die.

“The fundamental progress of Bangalore as an intellectual capital is there. Critical mass has been reached. It will continue,” he said.

Bangalore has seen a bust before. The bursting of the dot-com bubble in 2001 resulted in a slew of layoffs. But the city, like India’s IT industry itself, quickly bounced back, as budget constraints encouraged U.S. firms to outsource more work.

Asif Saud, 33, grew up in Bangalore, and over the last decade has watched his city grow faster than its snarled streets can handle, as Indians migrated from across the nation to snap up a seemingly endless supply of IT jobs.

“Doctors were trying to shift to software companies because doctors weren’t paid as much,” he said. “Salaries got bigger. People used to be happy with 5,000 rupees (US$102) a month. Now people are getting salaries of one or two lakh (US$2,046 to US$4,092) a month.”

That money boosted the price of real estate, and fueled a rash of mall-building.

In 2001, Saud said he lost his job at a mid-size software services firm, which prompted him to start his own business building Web sites. Layoffs at Bangalore’s tech giants would be great for him, he said: “We’ll be able to hire expertise at a cheaper cost.”

Outside the cool air conditioning and twinkling displays of the Forum sits Shankar, 29, who has been selling wash rags for 10 rupees (US$0.20) a piece at traffic lights for 12 years.

He says he’s profitted from Bangalore’s boom, paying for his sister’s dowry and a small house for his parents. But this year he’s fallen on family trouble, and got robbed by some men he’d hired to sell rags for him, he said.

“Before it was very good. Now it’s worse than death,” he said.

As night deepened, he sat on a curb across the street from a glowing Tata AIG Insurance sign. He’s not expecting a bailout any time soon.

Source: AP