Global Technology| July 22, 2015 CCyycclliiccaall aanndd SSeeccuullaarr PPrreessssuurreess oonn SSeerrvveerr SSppeenndd Our June Morgan Stanley CIO survey (“OOvveerraallll IITT BBuuddggeett GGrroowwtthh SSuussttaaiinnss,, BBuutt aa FFeeww CCrraacckkss SSttaarrttiinngg ttoo SShhooww”) reported overall enterprise IT budget growth expectations remained largely unchanged from our April survey. However, some cracks have appeared with higher expectations for budget cuts, a growing mentality of cost cutting, increased discounting, and longer purchasing cycles. Given the increased potential for downward IT budget revisions (Exhibit 3), we see the follow-through of cuts to overall IT budget growth as an elevated risk in our next survey in October. While cloud growth remains positive, a combination of slower revenue growth at some of the large hyperscale vendors and increased efficiency initiatives is pressuring spend in that market as well (detailed below). Overall we see: 1) potential for lower enterprise IT budget growth, 2) pressure on traditional OEM storage and server demand, and 3) slower cloud spending growth rate as material headwinds for data center infrastructure providers and their suppliers. EExxhhiibbiitt 44:: Revision Expectations Highlight Downside Risk to Enterprise IT Budget Outlook Source: Morgan Stanley CIO Survey 4