I love it when the so-called “experts” get it wrong.  That’s what happened today as data storage technology firm Xyratex (XRTX) reported Q3 earnings that easily smashed consensus Street estimates.  The company’s net income came in at $7.8 million, or 26 cents a share.  That’s a huge improvement over what was essentially flat net income just one year ago.  But the real impressive number was the 36 cents per share the company earned despite a decline in revenue. Analysts were expecting the company to earn just 21 cents a share, excluding items.  

It didn’t take long for Wall Street traders to jump on the Xyratex bandwagon. The stock was up nearly 3.4% in Wednesday trade, and in after-hours trading, the shares climbed as much as 19% higher.  

Like so many companies this quarter, Xyratek achieved its earnings beat largely by cutting costs.  But the company did say that despite the recession, sales late in the quarter were better than expected.

The improvement in Xyratek is part of a trend we’ve seen in overall corporate IT spending, as reported by the ChangeWave Alliance Research Network.  According to the most recent ChangeWave surveys, the climate amongst IT corporate purchasers continues to improve.  More importantly, our surveys indicate a more pronounced improvement going into the first half of 2010.

In terms of IT spending in Q3, the Alliance found a slight improvement, but keep in mind that the survey was taken at about the midway point of the third quarter.  As for the next 90 days, here again, we see a steady improvement in terms of planned IT spending for Q4.  But when it comes to the real positivity, we’ll likely have to wait for the first half of next year. It’s this measure where we see the most improvement in planned IT spending.

The trends in overall IT spending bode well for a company like Xyratex, and while I am not yet prepared to put my portfolio dollars on the line in XRTX, it is a stock I have firmly on my watch list as we head into the final quarter of what has been a most-interesting year.  I recommend you do the same with XRTX.

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