Changewave Research: Corporate IT Spending

ChangeWave Research: Corporate IT Spending

4Q 2013 Corporate IT Spending Trends Business IT Growth Slows – But Smart Phones and Tablets Remain Strong Jean Crumrine Overview: After two consecutive quarterly improvements, ChangeWave's latest corporate survey points to a slight contraction in the IT spending growth rate going forward. Despite the lack of momentum in overall IT spending there are still positives, including strong business demand for smart phones and tablets, along with continued corporate momentum for Apple and Samsung. A total of 1,509 respondents involved with IT spending in their organization participated in the August 7-21 survey, which also focused on business demand for PCs and Ultrabooks. ChangeWave Research is a service of 451 Research. 90 Day Outlook: One-in-five (20%) respondents say their company’s IT spending will decrease (or there will be no spending at all) for 4th Quarter – 2-pts worse than in our May survey. Only 16% say their IT spending will increase – 1-pt worse than previously.

Putting the Findings in Context. As the following chart shows, after two consecutive improvements, the findings this quarter point to a net 3-pt decline in U.S. IT spending.

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. ChangeWave Research: Corporate IT Spending

Seasonal factors likely account for some of the tightening this quarter. We note this is the eighth time in the past 10 years we’ve seen a drop in our August IT survey. This notwithstanding, the downtick signals a tighter environment for the business economy. 1st Half 2014: Looking further ahead at 1st half 2014 there are encouraging signs. A total of 18% think their IT budget will be greater than the 2nd half of 2013, and while 20% believe it will be less it’s a net 3-pt improvement since the previous survey. Current Quarter: We also asked respondents if their IT spending was on track thus far in the 3rd Quarter, and 13% say they’ve spent More than Planned so far and 25% Less than Planned – but that’s a net 1-pt better than previously.

Of the 13 IT spending categories tracked in this survey, Operating Systems/ Platforms (Change in Net Diff Score = +2) is showing the biggest increase since last quarter. Impact of Government Fiscal Issues Congress is again facing several key deadlines on fiscal issues, including funding the U.S. Government past September, raising the debt limit and further sequester cuts. We asked corporate respondents whether government fiscal issues are causing adjustment to be made to their company’s 4Q IT budgets, and a total of 11% reported their company is Decreasing 4Q IT budgets because of these fiscal issues and the associated uncertainty. To put this in context, last quarter 11% also reported their company IT budget was decreasing due to the sequester cuts. So while the results show current government fiscal issues are having at least some negative effect, the impact on corporate IT budgets isn’t any worse than earlier in the year when initial sequester cuts were being made. Moreover, comparisons with previous ChangeWave findings show the current issues are having a less damaging impact on IT budgets than we saw two years ago during the 2011 debt crisis and last year during the run up to the Fiscal Cliff. Planned Corporate Smart Phone Buying One key positive in the survey is smart phone demand, where 41% report their company plans to buy smart phones next quarter – up 1-pt since May and tied for the third highest level ever in a ChangeWave survey.

2 ChangeWave Research: Corporate IT Spending Samsung. At the individual manufacturers’ level, Samsung (37%) is registering another leap in corporate demand – up 4-pts for the second survey in a row. This represents the ninth increase in the past ten surveys for Samsung, and a new all-time high in terms of planned corporate purchases.

The Galaxy S 4 is continuing to drive much of the surge this quarter, with two-in-three (61%) Samsung buyers saying that’s the model their company is purchasing. There is still demand for the Galaxy S III (18%), while the next generation Note III (7%) – expected in the fall – is also garnering advance interest among buyers. Apple vs. BlackBerry. The other company showing momentum this quarter is Apple (67%), which is up 3-pts to a new high in planned corporate smart phone purchases.

Apple’s leap corresponds with a widely expected release of the next generation “iPhone 5S” in September. After presenting respondents with a description of probable features, we asked whether an “iPhone 5S” release will have any impact on their company’s 4th quarter smart phone buying plans. One-in-ten companies (11%) report a new iPhone release would Increase their overall purchases of iPhones – a clear sign that anticipation for a new launch is having an impact on Apple planned purchases going forward. In contrast, the latest results paint a grim picture for BlackBerry. After upticks in the past two surveys, BlackBerry (30%) has fallen 4-pts to its second lowest level ever in a ChangeWave survey – offering little hope that the newest Z10 and Q10 models are

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 3 ChangeWave Research: Corporate IT Spending generating enough momentum to salvage their recent promising movement in the corporate market. Nokia. For the second quarter in a row, Nokia (7%) remains unchanged and at their ChangeWave high in planned buying. Motorola vs. HTC. Motorola (12%) is registering a 1-pt uptick in corporate buying. And while it’s only a slight increase off their May low, it’s the first in six quarters. This represents a hopeful sign that new launches – like the Moto X – can provide renewed interest in the Android vendor.

On the other hand, HTC (8%) has fallen 2-pts to its lowest level in more than three years. The HTC One (their new flagship Android device which has received positive reviews) tops the list of HTC devices companies are buying, with Windows Phone 8X in second, but thus far this hasn't translated to measurable traction for HTC in terms of corporate buying plans. Mobile Operating Systems. In terms of mobile OS preferences, the Apple iOS (63%) remains the top choice among corporate buyers, followed by Google’s Android OS (43%) – both up 2-pts from May. BlackBerry OS (28%) has fallen 5-pts to its all-time low. Microsoft’s Windows Phone 8 (9%) is down 2-pts from its peak last quarter. OS Customer Satisfaction. We took a close-up look at company satisfaction with smart phone operating systems. As we’ve seen in previous ChangeWave surveys, Apple is the clear leader with 58% of iPhone business users reporting they're Very Satisfied with iOS.

In a positive finding for the Windows Phone 8 OS (44%), it’s maintaining a hold on second place in terms of OS satisfaction. Android (35%) is in third. We note the satisfaction rating

4 ChangeWave Research: Corporate IT Spending for BlackBerry OS (28%) has slipped since the May survey – a further discouraging sign for the struggling manufacturer. Business Tablet Demand Going forward, one-in-four companies (25%) say they’ll be purchasing tablets for their employees during 4th Quarter, 1-pt below the all-time high in last quarter’s survey.

Apple. The Apple iPad remains the overwhelming top choice in the corporate tablet market, with three-in-four (74%) companies that plan to buy tablets saying they’ll purchase iPads – though that’s down slightly from the previous survey.

Samsung. While the rest of the competition remains well behind Apple, Samsung (21%) continues to break out from the pack – surging 5-pts since our previous survey to its highest level of the past 36 months.

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 5 ChangeWave Research: Corporate IT Spending

Microsoft (13%) has declined 3-pts from their high last quarter in corporate tablet buying. We note Google (6%) has registered a 1-pt uptick and H-P (6%) is up 2-pts. Tablet Customer Satisfaction. As we've seen in previous ChangeWave surveys, Apple has the highest level of customer satisfaction in the corporate tablet industry, with 65% of iPad business users reporting they're Very Satisfied with their device. Microsoft Surface (33%) remains a distant second – narrowly edging out Samsung (30%). ‘Bring Your Own Device’ Trends Even with the rise in corporate demand for smart phones and tablets, we continue to see strength in the trend towards ‘Bring Your Own Device’ (BYOD). More than half of respondents (55%) say their company allows employees to use their personal smart phones and/or tablets for business purposes. Corporate PCs After an uptick last quarter, corporate desktop buying is settling back to the same level as six months ago, with 62% saying their company will buy desktops in 4th Quarter (down 2- pts). Planned laptop buying (68%) is unchanged for the second quarter in a row.

Planned Buying By Manufacturer. In terms of next quarter laptop buying, Apple (16%) is seeing a 1-pt uptick matching its highest level ever in a ChangeWave survey. H-P (15%) is also up 1-pt, while Dell (23%) is down 2-pts to a new low. Lenovo remains unchanged from the previous survey at their highest level of the past six years.

6 ChangeWave Research: Corporate IT Spending

After registering an uptick in the previous survey, Dell desktop demand (24%) has fallen 2- pts this quarter, while H-P (15%), Apple (8%) and Lenovo (7%) are all unchanged. We note that even though Lenovo is unchanged in both desktop and laptop buying they are at the highest level we’ve seen in more than four years.

Ultrabooks. Corporate demand for Ultrabooks continues to show a small, but steady increase – even as overall laptop demand is relatively flat. A total of 11% of corporate respondents planning to buy laptops next quarter say their company will purchase Ultrabooks in 4th Quarter – a 1-pt increase since February. Dell (38%; down 4-pts) remains the leader in planned corporate Ultrabook buying, but H-P (33%) ranks a close second and is showing the greatest momentum with a 7-pt jump since previously.

Several other manufacturers are also showing increases, including Lenovo (26%; up 1-pt), Samsung (13%; up 2-pts) and ASUS (11%; up 4-pts). Computer Operating Systems. We asked corporate respondents which operating systems they’ll be installing on their new PCs next quarter, and the influence of upcoming releases is clear.

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 7 ChangeWave Research: Corporate IT Spending One-in-five (21%) say they’ll be installing Windows 8 OS – up 1-pt since previously. Mac OS X (10% Mountain Lion; 5% Mavericks) is also seeing a 1-pt uptick as the new Mavericks version is expected later this fall. While 37% still say their company prefers Windows 7, this is down 2-pts from May. It’s been a year since Microsoft launched the Windows 8 OS, and the October update has several enhancements, including the return of the Start button and other features targeted at enterprise users. In light of this development, we asked respondents about their company’s current Windows 8 rollout plans, and the impact of the impending update. Last quarter when Microsoft was rumored to be releasing an update we found companies deferring Windows 8 rollout plans while waiting for the new version, but now that a mid- October release is set for Windows 8.1 we’re seeing the opposite is occurring.  Among respondents from companies already in the process or planning to roll out Windows 8 OS, 22% say the 8.1 release is causing their company to Accelerate current Windows 8 rollout plans compared to just 9% Delay.  Microsoft also recently announced they will stop supporting Windows XP and Office 2003 in April 2014. When we asked how this is affecting corporate Windows 8 rollout plans, the findings are even stronger, with 16% saying this development will make their company Accelerate current Windows 8 rollout plans, compared with just 3% Delay. Bottom Line: After two consecutive quarterly improvements, the latest corporate IT spending survey points to a net 3-pt contraction in the business purchasing growth rate. While seasonality is partially responsible, the decline this quarter is an important cautionary signal for the U.S. business economy.

Nonetheless, there are still several positives in the business IT spending environment, including continued strong demand for smart phones and tablets. Apple and Samsung are the momentum leaders in each of these markets.

Apple is maintaining its dominant position in both tablet and smart phone demand, as well as in corporate customer satisfaction. And Apple laptop buying is at an all-time high.

Samsung is showing another surge in smart phones – reaching a new high in terms of planned buying. Samsung has also pulled ahead in the race for second in the tablet market, with Microsoft down in buying plans for 4th Quarter.

The uptick we previously saw for BlackBerry in corporate smart phones has proven short- lived. BlackBerry has fallen to third in terms of corporate purchase plans. These discouraging findings are a warning signal that the new OS and model launches are not enough to sustain BlackBerry’s much-needed rebound in the corporate market.

8 ChangeWave Research: Corporate IT Spending Summary of Key Findings

The ChangeWave Research Network is a group of 25,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 9 ChangeWave Research: Corporate IT Spending Table of Contents

Summary of Key Findings...... 9

The Findings...... 11

4th Quarter 2013 Visibility...... 11

...... Projected IT Spending: A Comparison ...... 11

...... Projected IT Spending For Next Quarter: Jun ’03 – Aug ‘13 ...... 11

...... Projected IT Spending By Company Size ...... 12

A Closer Look at 1st Half 2014...... 12

...... Looking Ahead – IT Budget for Next Half ...... 12

Green Light Spending...... 13

...... Willingness to Spend on IT Products and Services ...... 13

3rd Quarter IT Spending...... 13

...... IT Spending Thus Far in Current Quarter (3Q 2013) ...... 13

IT Spending Categories...... 14

Impact of Government Fiscal Issues...... 16

Corporate Smart Phone, Tablet and PC Markets ...... 17

Corporate Smart Phones ...... 17

Corporate Tablets ...... 23

Corporate PCs and Ultrabooks ...... 27

ChangeWave Research Methodology ...... 33

About ChangeWave Research ...... 34

About The 451 Group ...... 34

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 11 ChangeWave Research: Corporate IT Spending I. The Findings

Introduction: After two consecutive quarterly improvements, ChangeWave's latest corporate survey points to a slight contraction in the IT spending growth rate going forward.

Despite the lack of momentum in overall IT spending there are still positives, including strong business demand for smart phones and tablets, along with continued corporate momentum for Apple and Samsung.

A total of 1,509 respondents involved with IT spending in their organization participated in the August 7-21 survey, which also focused on business demand for PCs and Ultrabooks. ChangeWave Research is a service of 451 Research.

90 Day Outlook: One-in-five (20%) respondents say their company’s IT spending will decrease (or there will be no spending at all) for 4th Quarter – 2-pts worse than in our May survey. Only 16% say their IT spending will increase – 1-pt worse than previously.

Putting the Findings in Context. As the following chart shows, after two consecutive improvements, the findings this quarter point to a net 3-pt decline in U.S. IT spending.

12 ChangeWave Research: Corporate IT Spending Seasonal factors likely account for some of the tightening this quarter. We note this is the eighth time in the past 10 years we’ve seen a drop in our August IT survey. This notwithstanding, the downtick signals a tighter environment for the business economy.

Projected IT Spending for Next Quarter (4Q 2013) – By Company Size:

1st Half 2014: Looking further ahead at 1st half 2014 there are encouraging signs. A total of 18% think their IT budget will be greater than the 2nd half of 2013, and while 20% believe it will be less it’s a net 3-pt improvement since the previous survey.

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 13 ChangeWave Research: Corporate IT Spending Willingness to Spend: We asked respondents to rate the willingness of their company to spend money on IT products and services. A total of 37% say their company is giving a “Green Light” to IT spending (i.e., spending is normal) – up 2-pts from the previous quarter.

While another 57% say their company has a “Yellow/Red Light” to spend on IT – this is also a 2-pt improvement.

Current Quarter: We also asked respondents if their IT spending was on track thus far in the 3rd Quarter, and 13% say they’ve spent More than Planned so far and 25% Less than Planned – but that’s a net 1-pt better than previously.

14 ChangeWave Research: Corporate IT Spending IT Spending Categories For which of the following main IT Spending categories - if any - have you spent more than planned thus far in the 3rd Quarter? (Check All That Apply)

Current Previous Previous Previous Previous Survey Survey Survey Survey Survey Aug ‘13 May ‘13 Feb ‘13 Nov ‘12 Aug ‘12 Security 10% 10% 9% 7% 8% Storage 9% 8% 8% 7% 8% PCs 9% 9% 9% 9% 9% Mobile Devices (e.g., Tablets, Smart 9% 9% 9% NA NA Phones) Software: Enterprise Applications 8% 7% 6% 6% 6% Servers 8% 9% 9% 7% 7% Networking 8% 8% 7% 7% 6% Software: Platforms/Operating Systems 6% 4% 5% 5% 5% Application Development Software/Tools 6% 6% 5% 4% 5% Outsourced IT Services: Systems 5% 5% 4% 4% 3% Integration/Implementation Communications 4% 4% 4% 3% 4% Virtualization 4% 4% 4% 4% 4% Software-as-a-Service (SaaS)/ 4% 3% 4% 2% 3% Outsourced Application Management Don't Know 19% 20% 21% 24% 21% Other 4% 4% 5% 6% 7% And for which of the following main IT Spending categories - if any - have you spent less than planned thus far in the 3rd Quarter? (Check All That Apply)

Current Previous Previous Previous Previous Survey Survey Survey Survey Survey Aug ‘13 May ‘13 Feb ‘13 Nov ‘12 Aug ‘12 PCs 18% 18% 18% 19% 19% Servers 12% 13% 12% 14% 13% Software: Enterprise Applications 9% 8% 9% 8% 8% Software: Platforms/Operating Systems 9% 9% 8% 9% 10% Storage 9% 8% 9% 10% 9% Mobile Devices (e.g., Tablets, Smart 9% 8% 9% NA NA Phones) Networking 8% 8% 9% 9% 10% Application Development Software/Tools 7% 7% 7% 7% 7% Security 5% 5% 6% 6% 6% Communications 5% 6% 5% 6% 4% Outsourced IT Services: Systems 5% 7% 5% 6% 6% Integration/ Implementation Virtualization 4% 5% 6% 5% 5% Software-as-a-Service (SaaS)/ 4% 3% 4% 4% 4% Outsourced Application Management Don't Know 23% 22% 24% 26% 23%

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 15 ChangeWave Research: Corporate IT Spending Other 3% 3% 4% 4% 3% Change in Net Difference Score: Current Survey (Aug ’13) vs. Previous Survey (May ’13) Current Previous Survey Survey Change Net Net in Net Overall IT Spending Categories Difference Difference Difference Score Score Score (Aug ’13) (May ‘13) Software: Platforms/ Operating Systems -3 -5 +2 Outsourced IT Services: Systems 0 -2 +2 Integration/Implementation Virtualization 0 -1 +1 Communications -1 -2 +1 Security +5 +5 0 Storage 0 0 0 Networking 0 0 0 Software-as-a-Service (SaaS)/ Outsourced 0 0 0 Application Management Software: Enterprise Applications -1 -1 0 Application Development Software/Tools -1 -1 0 Servers -4 -4 0 PCs -9 -9 0 Mobile Devices (e.g., Tablets, Smart Phones) 0 +1 -1

Of the 13 IT spending categories tracked in this survey, Operating Systems/ Platforms (Change in Net Diff Score = +2) is showing the biggest increase since last quarter. Other categories showing improvements include Outsourced IT Services: Systems Integration/ Implementation, Virtualization and Communications.

16 ChangeWave Research: Corporate IT Spending Impact of Government Fiscal Issues

Congress is again facing several key deadlines on fiscal issues, including funding the U.S. Government past September, raising the debt limit and further sequester cuts.

We asked corporate respondents whether government fiscal issues are causing adjustment to be made to their company’s 4Q IT budgets, and a total of 11% reported their company is Decreasing 4Q IT budgets because of these fiscal issues and the associated uncertainty. To put this in context, last quarter 11% also reported their company IT budget was decreasing due to the sequester cuts.

Thinking about your company's overall IT budget for 4th Quarter (Oct-Dec) 2013, are these looming fiscal issues and associated uncertainty causing your company to make any adjustments to your IT budget over the next 90 days? Current Survey Aug ‘13 Yes, We Are Decreasing Our 4th Quarter 2013 IT Budget 11% Over the Next 90 Days Because of the Fiscal Issues and Associated Uncertainty Yes, We Are Increasing Our 4th Quarter 2013 IT Budget 2% Over the Next 90 Days Because of the Fiscal Issues and Associated Uncertainty No, There Will be No Change in Our 4th Quarter 2013 IT 74% Budget Over the Next 90 Days Because of the Fiscal Issues and Associated Uncertainty Don't Know/ 12%

So while the results show current government fiscal issues are having at least some negative effect, the impact on corporate IT budgets isn’t any worse than earlier in the year when initial sequester cuts were being made.

Moreover, comparisons with previous ChangeWave findings show the current issues are having a less damaging impact on IT budgets than we saw two years ago during the 2011 debt crisis and last year during the run up to the Fiscal Cliff.

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 17 ChangeWave Research: Corporate IT Spending II. Corporate Smart Phones, Tablets, and PCs

(A) Corporate Smart Phone Demand

Planned Corporate Smart Phone Buying. One key positive in the survey is smart phone demand, where 41% report their company plans to buy smart phones next quarter – up 1- pt since May and tied for the third highest level ever in a ChangeWave survey.

Smart Phone Manufacturers

Samsung. At the individual manufacturers’ level, Samsung (37%) is registering another leap in corporate demand – up 4-pts for the second survey in a row. This represents the ninth increase in the past ten surveys for Samsung, and a new all-time high in terms of planned corporate purchases.

The Galaxy S 4 is continuing to drive much of the surge this quarter, with two-in-three (61%) Samsung buyers saying that’s the model their company is purchasing. There is still demand for the Galaxy S III (18%), while the next generation Note III (7%) – expected in the fall – is also garnering advance interest among buyers.

18 ChangeWave Research: Corporate IT Spending Samsung Planned Buyers Samsung Galaxy S 4 61% Samsung Galaxy S III 18% Samsung Galaxy Note III 7% (expected Fall 2013) Samsung Galaxy S 4 Mini 6% Other Samsung 8%

Apple vs. BlackBerry. The other company showing momentum this quarter is Apple (67%), which is up 3-pts to a new high in planned corporate smart phone purchases.

Apple’s leap corresponds with a widely expected release of the next generation “iPhone 5S” in September. After presenting respondents with a description of probable features, we asked whether an “iPhone 5S” release will have any impact on their company’s 4th quarter smart phone buying plans. Apple is expected to release their next generation “iPhone 5S” in September. New features will likely include a faster processor, improved camera and battery life, fingerprint scanner and the new iOS 7 operating system. The “iPhone 5S” is expected to cost $199 for the 16GB model, $299 for the 32GB model, $399 for the 64GB model and $499 for the 128GB model, with a 2-year contract on most of the major carriers. If Apple does release the “iPhone 5S” this fall, what impact - if any - will it have on your company's 4th Quarter smart phone purchasing plans?

Current Survey Aug ‘13 iPhone 5S Release Will Increase our Overall 11% Purchases of Apple iPhones iPhone 5S Release Will Decrease our 0% Overall Purchases of Apple iPhones iPhone 5S Release Will Have No Impact on 39% our Overall Purchases of Apple iPhones Our Company Does Not Purchase Apple 34% iPhones This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 19 ChangeWave Research: Corporate IT Spending Don’t Know/NA 16% One-in-ten companies (11%) report a new iPhone release would Increase their overall purchases of iPhones – a clear sign that anticipation for a new launch is having an impact on Apple planned purchases going forward. In contrast, the latest results paint a grim picture for BlackBerry. After upticks in the past two surveys, BlackBerry (30%) has fallen 4-pts to its second lowest level ever in a ChangeWave survey – offering little hope that the newest Z10 and Q10 models are generating enough momentum to salvage recent promising movement in the corporate market. We note corporate demand for the full touchscreen Z10 device (52%) remains ahead of the Q10 (40%), which features a physical keyboard. BlackBerry Planned Buyers BlackBerry Z10 52% BlackBerry Q10 40% Other BlackBerry 8% Nokia. For the second quarter in a row, Nokia (7%) remains unchanged and at their ChangeWave high in planned buying.

Motorola vs. HTC. Motorola (12%) is registering a 1-pt uptick in corporate buying. And while it’s only a slight increase off their May low, it’s the first in six quarters. This represents a hopeful sign that new launches – like the Moto X – can provide renewed interest in the Android vendor.

On the other hand, HTC (8%) has fallen 2-pts to its lowest level in more than three years. The HTC One (their new flagship Android device which has received positive reviews) tops the list of HTC devices companies are buying, with Windows Phone 8X in second, but thus far this hasn't translated to measurable traction for HTC in terms of corporate buying plans.

(FOR THOSE COMPANIES BUYING SMART PHONES IN 4TH QUARTER 2013) Who is the manufacturer of the Smart Phones your company is planning on buying? (Check All That Apply)

Curren t Previous Previous Previou Previous Survey Survey Survey s Survey Survey Aug May ‘13 Feb ‘13 Nov ‘12 Aug ‘12 ‘13 Apple (e.g., iPhone) 67% 64% 64% 66% 66% Samsung (e.g., Galaxy S 4, Galaxy S 4 Mini, 37% 33% 29% 30% 26% Note III) BlackBerry (e.g., Q10, Z10) 30% 34% 32% 29% 33% Motorola (e.g., Moto X, Droid Razr Maxx HD) 12% 11% 14% 16% 18% HTC (e.g., One, First, Windows Phone 8X) 8% 10% 11% 11% 12% Nokia (e.g., Lumia 1020, Lumia 928) 7% 7% 6% 4% 4% LG (e.g., Google Nexus 4, Optimus G Pro) 4% 3% 7% 6% 4% Sony (e.g., Xperia SP, Xperia L) 2% 2% 2% NA NA Huawei (e.g., Ascend Y, Premia) 1% 1% NA NA NA ZTE (e.g., Engage, Grand S) 1% 1% NA NA NA Kyocera/Sanyo (e.g., Hydro, Torque) 0% 1% 1% NA NA Lenovo (e.g., K900, S890) 0% 1% 1% NA NA Don't Know 0% 0% 1% 1% 0%

Mobile Operating Systems. In terms of mobile OS preferences, the Apple iOS (63%) remains the top choice among corporate buyers, followed by Google’s Android OS (43%) – both up 2-pts from May.

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 21 ChangeWave Research: Corporate IT Spending

BlackBerry OS (28%) has fallen 5-pts to its all-time low. Microsoft’s Windows Phone 8 (9%) is down 2-pts from its peak last quarter.

(FOR THOSE COMPANIES BUYING SMART PHONES IN 4TH QUARTER 2013) Which of the following mobile Operating Systems will be installed on the Smart Phones your company is planning on buying? (Check All That Apply)

Current Previous Previous Previous Previous Survey Survey Survey Survey Survey Aug ‘13 May ‘13 Feb ‘13 Nov ‘12 Aug ‘12 iOS (Apple) 63% 61% 61% 64% 63% Android (Google) 43% 41% 38% 41% 37% Blackberry OS 28% 33% 32% 30% 34% Windows Phone 8 (Microsoft) 9% 11% 11% 9% 2% Windows Phone 7 (Microsoft) NA NA NA 3% 5% Don't Know 2% 2% 3% 3% 2% Other 0% 0% 0% 3% 3%

OS Customer Satisfaction. We took a close-up look at company satisfaction with smart phone operating systems. As we’ve seen in previous ChangeWave surveys, Apple is the clear leader with 58% of iPhone business users reporting they're Very Satisfied with iOS.

In a positive finding for the Windows Phone 8 OS (44%), it’s maintaining a hold on second place in terms of OS satisfaction. Android (35%) is in third. We note the satisfaction rating for BlackBerry OS (28%) has slipped since the May survey – a further discouraging sign for the struggling manufacturer.

The following are overall enterprise smart phone operating system satisfaction ratings:

Overall, how satisfied is your company with each of the following mobile Operating Systems? (Please rate only those mobile Operating Systems your company currently supports or plans to support.)

Windows iOS Android Blackberry Phone 8 (Apple) (Google) OS (Microsoft) Very Satisfied 58% 44% 35% 28% Somewhat Satisfied 38% 49% 59% 51% Somewhat Unsatisfied 2% 5% 6% 14% Very Unsatisfied 2% 2% 1% 7%

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 23 ChangeWave Research: Corporate IT Spending (B) Business Tablet Demand

Planned Corporate Tablet Buying. Going forward, one-in-four companies (25%) say they’ll be purchasing tablets for their employees during 4th Quarter, 1-pt below the all-time high in last quarter’s survey.

Apple. The Apple iPad remains the overwhelming top choice in the corporate tablet market, with three-in-four (74%) companies that plan to buy tablets saying they’ll purchase iPads – though that’s down slightly from the previous survey.

Samsung. While the rest of the competition remains well behind Apple, Samsung (21%) continues to break out from the pack – surging 5-pts since our previous survey to its highest level of the past 36 months.

Microsoft (13%) has declined 3-pts from their high last quarter in corporate tablet buying. We note Google (6%) has registered a 1-pt uptick and H-P (6%) is up 2-pts.

Here are the complete results for 4th Quarter tablet buying: (FOR THOSE COMPANIES BUYING TABLETS IN 4TH QUARTER 2013) Who is the manufacturer of the Tablets your company is planning on buying? (Check All That Apply) Current Previous Previous Previou Previous Survey Survey Survey s Survey Survey Aug ‘13 May ‘13 Feb ‘13 Nov ‘12 Aug ‘12 Apple (e.g., iPad with Retina display, iPad 74% 77% 77% 73% 82% mini, iPad 2) Samsung (e.g., Galaxy Tab 3, Tab 2, Galaxy 21% 16% 14% 16% 13% Note III, Note 10.1) Microsoft (e.g., Surface) 13% 16% 14% 16% 5% Dell (e.g., XPS 10, Latitude 10) 6% 6% 6% 8% 6% Google (e.g., Nexus 10, Nexus 7 Second Gen) 6% 5% 4% 6% 3% H-P (e.g., ElitePad, TouchPad) 6% 4% 5% 5% 4% Amazon (e.g., Kindle Fire HD, Kindle Fire) 4% 3% 4% 3% 4% Lenovo (e.g., IdeaTab, ThinkPad) 4% 4% 3% 3% 3% ASUS (e.g., Transformer Pad, Vivo Tab) 3% 3% 4% 4% 3% BlackBerry (e.g., PlayBook) 2% 3% 3% 2% 2% Acer (e.g., Iconia) 1% 0% 2% 1% 3% Motion (e.g., CL910, J3600) 1% 1% 1% 1% 1% Motorola (e.g., Xoom, Xyboard) 1% 2% 1% 2% 1% Toshiba (e.g., Thrive, Excite) 1% 1% 2% 1% 1% Don't Know 0% 0% 1% 0% 1% Other 1% 6% 5% 8% 6%

Tablet Customer Satisfaction. As we've seen in previous ChangeWave surveys, Apple has the highest level of customer satisfaction in the corporate tablet industry, with 65% of iPad business users reporting they're Very Satisfied with their device.

Microsoft Surface (33%) remains a distant second – narrowly edging out Samsung (30%).

How satisfied is your company with the Tablets your company currently provides or has previously provided? Apple Microsoft Samsung Google Dell Very Satisfied 65% 33% 30% 21% 20% Somewhat Satisfied 28% 37% 50% 41% 35% Very Unsatisfied 5% 16% 7% 22% 27% Somewhat Unsatisfied 2% 14% 13% 17% 19%

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 25 ChangeWave Research: Corporate IT Spending Other Tablet Findings

Tablet Operating Systems. We asked corporate respondents which operating systems will be installed on their new tablets next quarter.

(FOR THOSE COMPANIES BUYING TABLETS IN 4TH QUARTER 2013) Which of the following mobile Operating Systems will be installed on the Tablets your company is planning on buying? (Check All That Apply)

Apple’s iOS (72%) is the top choice. Android (28%) ranks second – up 6-pts since previously, followed by Windows 8 Pro (19%).

Wireless Providers and the Corporate Tablet Market We also asked respondents in companies planning to buy tablets, which wireless service – if any – their company will be using.

Note: 20% of respondents to the August 2013 survey answered ‘Don’t Know/Other’.

Verizon (32%) has jumped 4-pts, widening its lead over AT&T (25%; down 1-pt) as the top choice among companies buying tablets next quarter. The other major U.S. carriers, Sprint (3%; down 1-pt) and T-Mobile (2%; down 1-pt), remain far behind.

We note one-in-five (20%) now report their company isn’t planning to use any wireless service on the tablets they’re purchasing next quarter – up 7-pts.

26 ChangeWave Research: Corporate IT Spending ‘Bring Your Own Device’ Trends

Even with the rise in corporate demand for smart phones and tablets, we continue to see strength in the trend towards ‘Bring Your Own Device’ (BYOD).

Some companies allow employees to use their personal smart phones and/or tablets for business purposes - such as company email, connecting to the corporate network, or using other IT resources. Other companies only allow access to email and other IT resources through approved, company-provided devices. Does your company allow employees to use their personal smart phones and/or tablets for business purposes?* Current Previous Previou Previous Survey Survey s Survey Survey Aug ‘13 May ‘13 Feb ‘13 Nov ’12 Yes - Both Smart Phones and Tablets 40% 39% 38% 36% Yes - Smart Phones Only 14% 15% 15% 15% Yes - Tablets Only 1% 1% 2% 1% No - Company Does Not Allow Any Corporate 19% 19% 22% 25% Email Access on Personal Devices Company Has No Policy Regarding Personal 17% 17% 14% 15% Devices, But Doesn't Restrict Access to Corporate Email Don’t Know 8% 9% 8% 8% * In previous February 2013 and earlier surveys the response choices were “No - Personal Devices are Not Allowed” and “Company Has No Policy Regarding Personal Devices”

More than half of respondents (55%) say their company allows employees to use their personal smart phones and/or tablets for business purposes.

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 27 ChangeWave Research: Corporate IT Spending (C) Corporate PC and Ultrabook Demand

PC Demand. After an uptick last quarter, corporate desktop buying is settling back to the same level as six months ago, with 62% saying their company will buy desktops in 4th Quarter (down 2-pts). Planned laptop buying (68%) is unchanged for the second quarter in a row.

Planned Buying By Manufacturer. In terms of next quarter laptop buying, Apple (16%) is seeing a 1-pt uptick matching its highest level ever in a ChangeWave survey. H-P (15%) is also up 1-pt, while Dell (23%) is down 2-pts to a new low. Lenovo remains unchanged from the previous survey at their highest level of the past six years.

After registering an uptick in the previous survey, Dell desktop demand (24%) has fallen 2- pts this quarter, while H-P (15%), Apple (8%) and Lenovo (7%) are all unchanged.

We note that even though Lenovo is unchanged in both desktop and laptop buying they are at the highest level we’ve seen in more than four years.

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 29 ChangeWave Research: Corporate IT Spending (FOR THOSE COMPANIES BUYING COMPUTERS IN 4TH QUARTER 2013) Who is the manufacturer and what computer type(s) is your company planning on buying? (Check All That Apply)

Desktops Current Previous Previous Previous Previous Survey Survey Survey Survey Survey Aug ‘13 May ‘13 Feb ‘13 Nov ‘12 Aug ‘12 Dell - Desktop Computer 24% 26% 25% 26% 27% Hewlett-Packard (including Compaq) 15% 15% 13% 15% 14% - Desktop Computer Apple - Desktop Computer 8% 8% 9% 9% 8% Lenovo (formerly IBM) - Desktop 7% 7% 6% 5% 5% Computer Acer (including Gateway and 1% 1% 2% 1% 2% eMachines) - Desktop Computer ASUS - Desktop Computer 1% 2% 1% 2% 1% Sony - Desktop Computer 0% 0% 0% 1% 0% Other - Desktop Computer 2% 2% 2% 1% 1% Don't Know 7% 7% 7% 11% 7% Not Buying Desktops in 4th Quarter 38% 36% 38% 36% 39%

Laptops Current Previous Previous Previous Previous Survey Survey Survey Survey Survey Aug ‘13 May ‘13 Feb ‘13 Nov ‘12 Aug ‘12 Dell - Laptop Computer 23% 25% 26% 26% 27% Apple - Laptop Computer 16% 15% 15% 16% 15% Hewlett-Packard (including Compaq) 15% 14% 14% 15% 14% - Laptop Computer Lenovo (formerly IBM) - Laptop 13% 13% 12% 10% 10% Computer Toshiba - Laptop Computer 4% 4% 4% 4% 5% Samsung - Laptop Computer 2% 2% 2% 1% 1% Acer (including Gateway and 2% 2% 2% 1% 2% eMachines) - Laptop Computer ASUS - Laptop Computer 2% 3% 2% 2% 2% Sony - Laptop Computer 1% 1% 1% 2% 1% Other - Laptop Computer 1% 1% 1% 1% 1% Don't Know 7% 8% 7% 11% 7% Not Buying Laptops in 4th Quarter 32% 32% 32% 30% 33%

30 ChangeWave Research: Corporate IT Spending Ultrabooks. Corporate demand for Ultrabooks continues to show a small, but steady increase – even as overall laptop demand is relatively flat.

A total of 11% of corporate respondents planning to buy laptops next quarter say their company will purchase Ultrabooks in 4th Quarter – a 1-pt increase since February.

Dell (38%; down 4-pts) remains the leader in planned corporate Ultrabook buying, but H-P (33%) ranks a close second and is showing the greatest momentum with a 7-pt jump since previously.

Several other manufacturers are also showing increases, including Lenovo (26%; up 1-pt), Samsung (13%; up 2-pts) and ASUS (11%; up 4-pts).

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 31 ChangeWave Research: Corporate IT Spending (FOR THOSE COMPANIES BUYING ULTRABOOKS IN 2ND QUARTER 2013) Who is the manufacturer of the Ultrabooks your company plans on buying? (Check All That Apply) Curren t Previous Survey Survey Aug Feb ‘13 ‘13 Dell (e.g., Inspiron 15z, XPS 14) 38% 42% Hewlett-Packard (e.g., Envy Pro, Folio 13) 33% 26% Lenovo (e.g., Thinkpad X1 Carbon, IdeaPad U410) 26% 25% Samsung (e.g., Series 9, Series 5) 13% 11% ASUS (e.g., VivoBook S500CA, Zenbook Prime) 11% 7% Toshiba (e.g., Satellite U845W, Portégé Z935) 7% 6% Acer (e.g., Aspire S7, Aspire S5) 6% 5% Sony (e.g. VAIO T Series, Duo 11) 3% 1% LG (e.g., Xnote Z450, Z350) 2% 0% Fujitsu (e.g., Lifebook UH572, U772) 1% 1% Vizio (e.g., Thin + Light) 1% 0% Don't Know 8% 8% Other 1% 3%

Computer Operating Systems. We asked corporate respondents which operating systems they’ll be installing on their new PCs next quarter, and the influence of upcoming releases is clear.

One-in-five (21%) say they’ll be installing Windows 8 OS – up 1-pt since previously. Mac OS X (10% Mountain Lion; 5% Mavericks) is also seeing a 1-pt uptick as the new Mavericks version is expected later this fall. While 37% still say their company prefers Windows 7, this is down 2-pts from May.

And for those companies buying computers in 4th Quarter 2013, what operating system(s) will be installed on your new computers? (Check All That Apply) Current Previous Previous Previous Previous Survey Survey Survey Survey Survey Aug ‘13 May ‘13 Feb ‘13 Nov ‘12 Aug ‘12 Windows 7 37% 39% 36% 32% 36% Windows 8 Pro 13% 13% 13% 13% 10% Windows 8 8% 7% 9% 11% 7% Windows Other NA NA 3% 6% 9% Mac OS X Mavericks 5% NA NA NA NA Mac OS X Mountain Lion * 10% 14% 13% 13% 16% Linux 4% 4% 5% 5% 6% Chrome OS 2% 2% 2% NA NA Other OS / Don’t Know 6% 7% 8% 9% 5% Not Buying Computers in 19% 19% 19% 18% 25% 4th Quarter

*In the previous August 2012 survey there were 2 response choices: ‘Mac OS X Mountain Lion’ (11%) and ‘Mac OS X Lion’ (5%).

It’s been a year since Microsoft launched the Windows 8 OS, and the October update has several enhancements, including the return of the Start button and other features targeted at enterprise users.

In light of this development, we asked respondents about their company’s current Windows 8 rollout plans, and the impact of the impending update.

Which of the following statements best describes the current status of Windows 8 at your company? Current Previous Survey Survey Aug ‘13 May ‘13 We Have Already Completed Our Windows 8 Rollout 4% 2% Our Windows 8 Rollout is Currently Underway 6% 4% We Have Just Begun Our Windows 8 Rollout 6% 4% We Plan to Rollout Windows 8, But Have Not Yet Begun 12% 10% We Currently Have No Windows 8 Rollout Plans 63% 67% Don’t Know /No Answer 9% 12%

A total of 4% say their company Already Completed a Windows 8 rollout, and 12% are in the process of rolling it out – a combined 6-pt increase since May. Another 12% say they Plan to Rollout Windows 8, But Have Not Yet Begun, up 2-pts from previously.

Last quarter when Microsoft was rumored to be releasing an update we found companies deferring Windows 8 rollout plans while waiting for the new version, but now that a mid- October release is set for Windows 8.1 we’re seeing the opposite is occurring.

Microsoft recently announced their updated Windows 8.1 operating system, which brings back the Start Menu button. Other changes include resizable Metro Snap panes, Internet Explorer 11, better SkyDrive integration, and more ways to customize the user interface. How does this development affect your company's current Windows 8 rollout plans - if at all? Respondents in Companies Planning to/ Already Rolling Out Windows 8 Current Previous Survey Survey Aug ‘13 May ‘13 Will Make Us Accelerate Our 22% 8% Current Windows 8 Rollout Plans Will Make Us Delay Our Current 9% 18% Windows 8 Rollout Plans No Effect on Our Current Windows 61% 63% 8 Rollout Plans Don't Know/NA 9% 11%

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 33 ChangeWave Research: Corporate IT Spending Among respondents from companies already in the process or planning to roll out Windows 8 OS, 22% say the 8.1 release is causing their company to Accelerate current Windows 8 rollout plans compared to just 9% Delay.

Microsoft also recently announced they will stop supporting Windows XP and Office 2003 in April 2014. When we asked how this is affecting corporate Windows 8 rollout plans, the findings are even stronger, with 16% saying this development will make their company Accelerate current Windows 8 rollout plans, compared with just 3% Delay.

Microsoft recently announced they will stop supporting Windows XP OS and Office 2003 as of April 2014. How does this development affect your company's current Windows 8 rollout plans if at all? Respondents in Companies Planning to/ Already Rolling Out Windows 8 Will Make Us Accelerate Our Current 16% Windows 8 Rollout Plans Will Make Us Delay Our Current Windows 8 3% Rollout Plans No Effect on Our Current Windows 8 Rollout 73% Plans Don't Know/NA 7%

34 ChangeWave Research: Corporate IT Spending ChangeWave Research Methodology

The current findings are based on a survey of ChangeWave Research Network members involved with IT spending in their organization, conducted August 7-21, 2013. The goal of the survey was to get an up-to-date picture of IT spending for the 4th Quarter of 2013. To this end, the survey was composed of a sample of 1,509 accredited members.

ChangeWave'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.

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

About ChangeWave Research

ChangeWave Research, a service of 451 Research, is a survey research firm that identifies and quantifies change in corporate buying & business trends, telecom trends, and consumer spending & electronics trends.

The ChangeWave Research Network is a group of 25,000 highly qualified business, technology, and medical professionals – as well as early adopter consumers – who work in leading companies of select industries. ChangeWave surveys its Network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports.

ChangeWave delivers its products and services on the Web at www.ChangeWaveResearch.com.

451 Research, LLC, including its ChangeWave Research service, 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.

About 451 Research

451 Research, a division of The 451 Group, is a leading global analyst and data company focused on the business of enterprise IT innovation. Clients of 451 Research – at end-user, service- provider, vendor, and investor organizations – rely on 451 Research’s insight through a range of syndicated research and advisory services to support both strategic and tactical decision-making. For additional information on 451 Research, go to: 451research.com. For More Information: ChangeWave Research Telephone: 301-250-2363 7101 Wisconsin Ave. Fax: 240-200-3988 Suite 1301 www.ChangeWaveResearch.com Bethesda, MD 20814 [email protected]

This information is from ChangeWave Research, a service of 451 Research, LLC, and contains confidential business information. It may not be copied or distributed without permission. ©2013 451 Research, LLC. All rights reserved. 35