Tech CFOs anticipate revenue increase in 2011

Tech firms will spend their capital on purchasing companies with products that complete their portfolios

Increased revenue will foster mergers and acquisitions in the technology space, according to a survey by accounting and consulting firm BDO USA that polled chief financial officers at technology firms.

The survey, conducted in January, found that 77 percent of the CFOs expect corporate revenue to increase in 2011, compared to 69 percent last year. This represents a marked difference from fiscal troubles of 2009 when only 30 percent of those polled projected a revenue increase. The executives predicted a 10.4 percent increase in revenue compared to last year.

"There is a sense of optimism compared to 2009, 2010," said Aftab Jamil, partner and national leader of the technology and life sciences practice at BDO USA. "This is consistent with other data points we've been hearing about what has been going on in the economy."

Last week's quarterly financial results from tech heavyweights gave credence to the sentiments of the 100 CFOs interviewed. Microsoft reported a record revenue of US$19.95 billion for the second quarter and SAP recorded a 27 percent increase in its fourth-quarter revenue compared to the year-ago period. EMC's consolidated revenue, which includes its VMware virtualization division, for its fourth quarter came in at a record $4.9 billion.

Despite the recession, technology firms have capital, said Jamil, partly because they trimmed research and development budgets to match the lean economy.

"They're sitting on a large amount of cash that is readily accessible," he said. "They have the means to execute. There is motivation to come out of their shell and preserve the market."

The survey reflected this attitude, with 39 percent of respondents calling revenue and profitability the main factor for mergers and 34 percent citing market share.

Technology companies will spend their funds on strategic growth purchases, according to 78 percent of the CFOs polled.

"The outlook is more offensive," Jamil said. "They target companies that resolve a problem that will be very complementary to their product portfolio."

Niche players in the technology space, like software companies, are prime acquisition targets, with 32 percent of respondents saying the software market will see the most merger activity in 2011.

Jamil cited Intel's August 2010 purchase of security software vendor McAfee as indicative of future merger trends in the software market.

While the survey conveyed financial optimism, the CFOs cited continued U.S. economic recovery as the critical factor in driving the technology sector's growth. Jamil said that the survey was designed to determine the nation's financial health and, taken with other data points, the outlook is positive.

"If I look at the responses there is a sense of optimism compared to 2010, when it was mixed data with some pockets doing better," he said. "Obviously, consumer confidence and the stock market are doing well, and there is easier capital access so companies can execute strategic projects."

Look for the personal technology space to also factor into the technology market's robustness, according to 19 percent of the survey respondents.

Purchases of smartphones, tablet PCs and other consumer devices will affect the entire industry, Jamil said. "Contract manufacturers, component suppliers, semiconductor suppliers, they're all riding that wave."

Beyond the economic recovery, 40 percent of the CFOs listed competition as their greatest challenge in 2011. Jamil cited foreign nations as the challengers.

Patent applications measure innovation and the U.S. leads in that area, but now innovation occurs outside of the U.S., he said, listing China, India and Israel as "pockets of excellence."

"This no longer means that Silicon Valley is where innovation will come from."

Join the Good Gear Guide newsletter!

Error: Please check your email address.

Tags business issuesMergers / acquisitionsapplicationsMicrosoftsoftwarefinancial resultsbusiness managementemc

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Fred O'Connor

IDG News Service
Show Comments

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?