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By | Kelly Fiveash 7th January 2008 17:19

Xerox boss says credit crisis could crunch IT budgets

Yes, no, maybe. Can you repeat the question?

Xerox has become the latest established IT company to join a chorus of complaints about how the credit crisis has begun to rock spending in the tech sector.

In an interview with the Financial Times today Xerox boss Anne Mulcahy, who has been working on turning fortunes around at the firm since taking charge in 2001, echoed the sobering sentiments of her corporate peers.

She said: "The hurdle rate for making investments has gone up in general... I think what we see in the US is heightened anxiety. We see the financial services industry tightening their belts, and rightfully so, based on the impacts there."

However, Mulcahy stopped short of suggesting that Xerox, which last November said it would restore its quarterly dividend after a six-year absence, would itself feel the impact of a credit squeeze. Instead, she reckoned the firm looked set to swerve any economic downturn.

Cynics might argue that the Xerox chief's grumbles about the subprime credit crisis coincided nicely with today's relaunch of the photocopier giant's corporate logo and brand image.

Indeed Xerox has, over the past year, rejigged its business model as it goes after greater market share – especially in the burgeoning SMB space – by punting software "solutions" in the hope of convincing customers to think outside of the big, grey box.

But Steve Brazier, CEO of IT analyst firm Canalsys, reckoned Xerox's stance was in fact endemic of a mature market panicking about other parts of the world elbowing their way into the picture.

He told The Register: "There is nervousness everywhere, particularly in the Anglo-US markets, but it's equally important to say that many parts of the world are enjoying record booms, notably China, Russia, the Middle East, Eastern Europe and India."

Brazier added: "Businesses whose outlook on life depends on the Anglo-US view will misunderstand what's going on because the world is changing."

"Those companies that are well-exposed to the East will do well, and I suspect that the likes of Xerox and Dell are simply not there yet."

In the UK, Brazier reckoned there was "no serious evidence" that the tech biz was about to hit the buffers.

Perhaps supporting his view for the year ahead, the CBI said today that despite some financial service sectors such as banks and insurance firms beginning to feel the credit pinch, investment in IT had in fact risen for the final quarter of 2007.

The CBI said that a two-year run of continuing growth had been brought to a halt, with 44 per cent of UK financial services firms surveyed saying that business volumes had fallen during the last quarter.

"After two years of strong growth there has been a clear turnaround within the financial services sector," said Ian McCafferty, CBI chief economic adviser.

"The credit squeeze has delivered a sharp shock to business volumes over the past three months, and it seems that difficulties are likely to persist for some time yet."

But the survey, which was carried out in association with Pricewaterhouse Coopers LLP, found that the financial sectors had continued to invest heavily in their IT infrastructure, with plans at their strongest since September 1997. ®

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