A third of chief financial officers in technology firms expect their company’s revenue to decrease this year, according to a survey.
In 2008, 73 per cent of CFOs surveyed predicted increased sales revenue, compared to only 30 per cent in 2009, according to the survey of 100 US CFOs, conducted by BDO Seidman. The survey found 37 per cent expected decreased ales in 2009, compared to just six per cent of CFOs in 2008.
The survey results "reflect what's going on in the marketplace," said Bob Strasser, a partner in BDO Seidman's Technology Practice. "The bad news is things have really changed significantly [in the tech sector] in the last year."
The tech industry in the last three or four months has seemed to have a shift in attitude about the US recession, with tech companies just now acknowledging that the difficult economy will affect them, Strasser said.
"The innovative spirit is still here, and I still think there's investment in R&D, but I just think companies are sticking more to basics," he added. "They're getting back to basics in the short term and focusing on those critical areas where they've historically been successful in."
The survey seems to mirror the mood after several tech companies have announced large layoffs in recent weeks. Last week, for example, IBM announced 4,200 layoffs. On 22 January, Microsoft said it would cut up to 5,000 jobs in research and development, marketing, sales, finance, legal, human resources and IT over the next 18 months.
In addition, 61 per cent of those surveyed for 2009 said their companies have restructured operations in response to the worldwide financial crisis. Forty-three per cent have reassessed the value of their assets, and 43 per cent are looking at new revenue collection methods, according to the survey.
"With larger companies, the challenge that they're facing sometimes is getting their customers to pay their bills," Strasser said. "It's not that they won't pay the bills, it's that companies are coming up with ever-more creative ways to extend out payment terms: 'Oh, gee, we're missing some support on that invoice.'"
A majority of the CFOs surveyed, 55 per cent, also saw an improved economy as the greatest driver of their growth. Only 13 per cent suggested that increased IT budgets would be the top driver of their growth, and 12 per cent said a demand for green technology was the top driver.
In 2008, 38 per cent of the survey respondents said their greatest challenge was the ability to recruit and retain talent, but only 12 per cent identified recruiting issues as the top concern in 2009. Managing risk, with 39 per cent, was the greatest challenge in 2009, up from 23 per cent in 2008, and access to capital was identified by 33 per cent of respondents as the greatest challenge, compared to 15 per cent in 2008.
As late as mid-2008, several large tech companies were pushing the US Congress to allow them to hire more foreign workers. Now, some of those same companies have announced layoffs. Some companies see 2009 as an opportunity to improve the quality of their teams during a time of layoffs, Strasser said.
Respondents were split about whether merger and acquisition activity would increase in 2009. Forty-three per cent said they believe mergers and acquisitions would increase, while 35 per cent said they believe such activities would decrease in 2009. In 2008, 41 per cent said they thought mergers and acquisitions would increase, and only 17 per cent said they would decrease.
There are several issues, some of them conflicting, that will affect the number of mergers and acquisitions, Strasser said. Tech companies having trouble generating revenue may see an acquisition as "a path of last resort," but some companies may think they are currently undervalued due to the struggling economy, he said.
BDO Seidman is a professional services firm providing assurance, tax, financial advisory and consulting services to other companies.