ChangeWave Research Report:

Corporate IT Spending Goes Negative

New Survey Confirms US Business Spending Has Entered Recession

February 20, 2008

Summary of Key Findings

• Chart One: 2nd Quarter 2008 IT Spending

• This Is What A Recession Looks Like
• Chart Two: Last 17 IT Spending Surveys
• Chart Three: IT Spending for Next Quarter – By Company Size

• Green Light Spending
• Chart Four: Willingness to Spend – A Comparison
• Chart Five: Willingness to Spend– By Company Size

• Spending So Far in 1st Quarter
• Chart Six: IT Spending Thus Far in Quarter – A Comparison
• Chart Seven: 1Q Spending By Company Size

• A Closer Look at 2nd Half 2008
• Chart Eight: IT Budget for Next Half – A Comparison

Corporate Smart Phones

ChangeWave Research Methodology

About ChangeWave Research

Projected IT Spending Goes Negative for 2Q Nearly one-in-four (23%) project their company’s 2Q 2008 IT spending will decrease – 3-pts worse than the previous survey Only 15% say spending will increase – a 9-pt drop The projected spending decrease is across companies of all sizes Other Indicators Only 43% say company has given a "Green Light" to IT spending (i.e., spending is normal) – down 9-pts from previous quarter to lowest level in more than four years

Current 1st Quarter – Worst Spending Slowdown for IT in 4 Years Only 10% say they’ve spent “More than Planned” so far in 1Q – down 7-pts from previous quarter 27% say they’ve spent “Less than Planned” – 3-pts worse than previously Individual Categories Biggest Slowdowns Storage (-6) Servers (-4) Software Enterprise Applications (-4) Security (-3)

Corporate Smart Phone Market – Current Share RIM Maintains Huge Lead RIM (73%; unchanged) ... Palm Falls Again Palm (18%; down 1-pt) ... As Does Motorola Motorola (9%; down 2-pts) ... While Apple Holds Steady Apple iPhone (5%) Future Buying Trends RIM (77%;up 3-pts) has overwhelming share of planned purchases for 2Q Apple (11%, down 3-pts) comes in second Palm (8%; down 2-pts) and Motorola (7%; down 2-pts) fall to lowest levels of year

ChangeWave’s latest corporate IT spending survey points to a negative growth rate for the 2nd Quarter of 2008, and confirms that U.S. business spending has already entered into a recession. A total of 2,013 respondents involved with IT spending in their organization participated in the survey, conducted February 11-15, 2008.

2Q 2008 IT Spending:  Nearly one-in-four respondents (23%) say their company’s IT spending will decrease (or there will be no spending at all) in the 2nd Quarter – 3-pts worse than the previous survey. Only 15% say spending will increase – an unprecedented 9-pt drop from previously.

A Picture of Negative Growth: As seen below, the percentage projecting decreased IT spending for 2nd Quarter 2008 is far greater than the percentage projecting an increase. You have to go all the way back to August 2001, to find another ChangeWave survey projecting this much negative IT spending growth.

Moreover, the following chart shows that the decrease in projected IT spending for the 2nd Quarter is occurring across companies of all sizes – including small (1-10 Employees), medium (11-100 &101–1000) and large (over 1,000 employees) companies.

Projected IT Spending for Next Quarter (2Q 2008) – By Company Size

Green Light Spending:  Looking ahead, we also asked respondents to rate the current willingness of their company to spend money on IT products and services.  Only 43% say their company is now giving a "Green Light" to IT spending (i.e., spending is normal) – a 9-pt drop from the previous quarter to the lowest level seen in more than four years.

The combined “Yellow Light/Red Light” percentage (53%) is higher than the “Green Light” percentage for the first time in more than four years.

Note that 40% say their company is giving a “Yellow Light" to spending (i.e., spending is downsized, though not completely stopped), while 13% say their company is giving a "Red Light" (i.e., spending is on hold).

Willingness of Company to Spend on IT Products and Services – By Company Size

Spending So Far in the 1st Quarter

(1) We’re halfway through the 1st Quarter. Based upon your IT Spending plans of three months ago, have you spent more than planned, less than planned, or the same as planned on IT products/services thus far in 1Q?

Current 1st Quarter. We also asked if IT spending was on track so far in the 1st Quarter, and again the results are the worst in a ChangeWave survey in more than four years.

Only 10% said they’ve spent “More than Planned” – down 7-pts from the previous survey.  Another 27% say they’ve spent “Less than Planned” – 3-pts worse than previously.

1st Quarter IT Spending by Company Size

(2) For which of the following main IT Spending categories - if any - have you spent more than planned thus far in the 1st Quarter? (Check All That Apply) (n=1,012)

(3) And for which of the following main IT Spending categories – if any – have you spent less than planned thus far in the 1st Quarter? (Check All That Apply) (n=1,012)

Change in Net Difference Score: Current Survey (Feb ‘08) vs. Previous Survey (Nov ‘07)

Storage (Change in Net Difference Score = -6) is the area registering the biggest slowdown. Software Enterprise Applications (-4), Servers (-4) and Security (-3) also look weaker.

A Closer Look at 2nd Half 2008.  Looking ahead to the second half of 2008 (Jul-Dec), only 19% of respondents think their company's IT budget will be greater than first half 2008 This is 6-pts less than the previous survey.  Another 20% think their IT budget will be less than first half 2008.  Note that half (51%) say their IT budgets will remain the same.

II. Corporate Smart Phones (i.e., Cell Phone with Integrated PDA)

Research in Motion (RIM) Holds Its Expansive Lead in Current Share

RIM Blackberry (73%; unchanged) is maintaining its expansive lead over the rest of its rivals in the corporate smart phone market.  Palm (PALM; 18%; down 1-pt) remains a far distant second.

We note that Motorola (MOT; 9%) has dropped another 2-pts to a new record low.

(1) Who is the manufacturer of the current Smart Phones your company provides? (Check All That Apply) (n=715)

Customer Satisfaction

While Apple still has a relatively small corporate market share, they continue to get sky high satisfaction ratings – three-in-five (59%) of their business customers say their company is Very Satisfied with the iPhone.

RIM ranks second, also with a relatively high Very Satisfied rating (47%), though we note this is an 8-pt decline from the previous survey.

Palm receives its lowest corporate satisfaction rating in a ChangeWave survey yet, with only 10% of corporate users saying their company is Very Satisfied with their Treos.

Future Corporate Smart Phone Buying

Looking ahead to the 2nd Quarter, RIM (77%) is the dominant leader in planned corporate smart phone buying – jumping 3-pts since our previous survey in November 2007.  Apple (11%) is second, down 3-pts from the high registered in our previous survey. 

Palm (8%), Motorola (7%) and Samsung (4%) have each experienced a 2-pt decline in terms of planned purchases, with each company registering its lowest market level of the past year.

(2) (FOR THOSE COMPANIES BUYING SMART PHONES IN 2nd QUARTER 2008) Who is the manufacturer of the Smart Phones your company is planning on buying? (Check All That Apply) (n=606)

Corporate Planned Buying: RIM vs. Palm

The current findings are based on a survey of ChangeWave Alliance members involved with IT spending in their organization, conducted February 11-15, 2008. The goal of the survey was to get an up-to-date picture of IT spending for the 2nd Quarter of 2008. To this end, the survey was composed of a sample of 2,013 accredited Alliance members.

The Alliance's proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.

ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, interprets and reconciles the information in a cohesive manner and converts the information into valuable quantitative and qualitative reports.

The Alliance has assembled its membership team from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (56%) have advanced degrees (e.g., Master's or Ph.D.) and 93% have at least a four-year bachelor's degree.

The business and investment intelligence provided by the Alliance provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

ChangeWave Research, a subsidiary of InvestorPlace Media, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries.

ChangeWave has a very unique asset in its 14,000-member Alliance. We have assembled our membership team from a broad cross section of more than 20 vertical markets such as telecom, semiconductors, data storage, and biotechnology, along with a wide range of professional disciplines including CIOs, IT managers and programmers, executive management, scientists, engineers and sales personnel.

The ChangeWave Alliance is composed of senior technology and business executives in leading companies – credentialed professionals who spend their everyday lives working on the frontline of technological change.

This proprietary research and business intelligence gathering system provides a real-time view of companies, technologies and business trends in key market sectors along with an in-depth perspective of the macro economy – well in advance of other available sources. ChangeWave surveys its 14,000 Alliance members on a wide range of investment research topics and converts the findings into valuable investment and business intelligence reports. ChangeWave delivers its products and services on the Web at www.ChangeWave.com.

ChangeWave Research does not make any warranties, express or implied, as to results to be obtained from using the information in this report. Investors should obtain individual financial advice based on their own particular circumstances before making any investment decisions based upon information in this report.

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