Survey: Tech CFOs pessimistic about '09

Survey: Tech CFOs pessimistic about '09

Many tech CFOs see fewer profits in 2009, according to a new survey from BDO Seidman.

Thirty-seven percent of technology industry chief financials officers expect their companies to experience decreased sales revenue in 2009 compared to last year, according to a survey by BDO Seidman.

In 2008, 73 percent of CFOs surveyed predicted increased sales revenue, compared to only 30 percent in 2009, according to the survey of 100 CFOs at leading U.S. tech businesses. Only 6 percent of CFOs survey expected decreased sales 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 U.S. 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, IBM announced 4,200 layoffs, and Sprint Nextel announced 8,000 job cuts. On Jan. 22, 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 percent of those surveyed for 2009 said their companies have restructured operations in response to the worldwide financial crisis. Forty-three percent have reassessed the value of their assets, and 43 percent 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 percent, also saw an improved economy as the greatest driver of their growth. Only 13 percent suggested that increased IT budgets would be the top driver of their growth, and 12 percent said a demand for green technologies was the top driver.

In 2008, 38 percent of the survey respondents said their greatest challenge was the ability to recruit and retain talent, but only 12 percent identified recruiting issues as the top concern in 2009. Managing risk, with 39 percent, was the greatest challenge in 2009, up from 23 percent in 2008, and access to capital was identified by 33 percent of respondents as the greatest challenge, compared to 15 percent in 2008.

As late as mid-2008, several large tech companies were pushing the U.S. 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 percent said they believe mergers and acquisitions would increase, while 35 percent said they believe such activities would decrease in 2009. In 2008, 41 percent said they thought mergers and acquisitions would increase, and only 17 percent 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 national professional services firm providing assurance, tax, financial advisory and consulting services to other companies.

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