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The Stimulus' Hidden Winners

Martha C. White, The Big Money
Wednesday, 4 Mar 2009 | 11:42 AM ET

A lot of early talk about who's going to win the Obama administration's stimulus lottery has focused on the construction and building-materials industries, but they're not the only industries that stand to reap substantial gains. Big technology companies are getting ready to party like it's March 10, 2000, all over again. IBM made the connection explicit at a Goldman Sachs conference last week, affirming that it was on track to increase profits in 2009 and acknowledging that this growth projection was due in part to anticipated demand generated by stimulus spending. As it turns out, there are several sections of the stimulus bill that could prove lucrative for tech behemoths. Here are a few of the most prominent:

Telecommunications infrastructure: This is the big kahuna for technology companies. There are multiple pots of money specifically dedicated to expanding and improving broadband access around the country, but many of the other infrastructure projects—including the health care and energy ones discussed below—implicitly require a broadband framework in order to work.

Let's start with a couple of acronyms. The stimulus includes $4.7 billion for NTIA (National Telecommunications and Information Administration) along with $2.5 billion for RUS (Rural Utilities Service). Although the programs are different, they share at least these goals: to add high-speed Internet to parts of the country that don't have it and to upgrade areas that have access only to slower connections. Existing telecommunications providers as well as network-management companies like Cisco can take a crack at these funds. In addition, IBM is lobbying to use the existing power-line grid to run broadband.

But these programs are only the beginning. The stimulus bill includes as much as $110 billion in indirect broadband opportunities. For example, $46.5 billion has been allotted to improve the country's transportation infrastructure. It's feasible—and preferable, industry advocates claim—to install fiber or other high-speed conduits right into the roadway during construction, actually layering the information highway within the physical highway. In addition, $12 billion allocated for public-housing projects could benefit broadband players if high-speed Internet is incorporated into new construction or retrofitted into existing complexes.

At $21 billion, school construction and repair is another big chunk of change that provides lucrative opportunities to telecoms and IT companies to do things like add broadband or VOIP to new and existing programs. This is on top of a separate pot of $650 million dedicated to in-class hardware, software, and training.

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Health care improvements: The stimulus includes a $17 billion line item to consolidate and digitize Americans' health records, a huge undertaking never attempted on such a grand scale. Earlier, piecemeal efforts to create a high-tech health-records library fizzled out because the systems tended to be pricey, buggy, and user-unfriendly.

While it's possible that big hospital networks like Kaiser Permanente might attempt to build their own electronic health-records system, most experts think big health technology providers like McKesson, Wellpoint, and Allscripts will be the ones to build and benefit from this program. Once again, Cisco could benefit here, thanks to demand for its souped-up switching and routing products (crucial for bandwidth-heavy tasks like transferring MRIs). The stimulus also includes another $2 billion to coordinate these efforts and get everyone from doctors to billing associates trained on the new system.

Greener energy: The stimulus sets aside $11 billion for the development of a modernized energy grid, part of an $83 billion pool allocated to clean technologies ranging from wind and solar farms to energy-efficient "smart" utility meters. A consortium of IT heavyweights including IBM, Microsoft, and HP, collectively called the Green Grid, is already tackling the issue of measuring and reducing energy usage in institutional IT settings. Companies like IBM would benefit from a government-sponsored push to data-storage centers that sip electricity rather than guzzle it.

The idea of overhauling the United States' antiquated electrical grid is appealing on two fronts. It would conserve more of the energy transmitted, since the amount of juice you get depends on how close you are to the source. (Think of what it's like listening to a city FM radio station in a far-flung bedroom community.) In addition, developing "revolving door" technology would let alternate energy sources like solar panels feed electricity back into the grid on a widespread scale. While many of the key players in this initiative would be startups currently under the radar, large telecom and IT companies would again benefit here because a more responsive system would need to be able to communicate with itself in real time.

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