Chicago, IL – February 1, 2011 – According to a study by BDO USA, LLP, one of the nation’s leading accounting and consulting organizations, 77 percent of chief financial officers (CFOs) at top U.S. technology companies expect revenue to increase in 2011. Continuing the upward trend in optimism, CFOs forecast an overall revenue increase of 10.4 percent, up from 2010 (8.7%) and a dramatic increase from 2009 (1.6%).
Merger and acquisition (M&A) activity is also expected to rise, with 78 percent of CFOs forecasting an increase, including 23 percent who expect it to increase significantly over 2010. Contending with heavy competition, 78 percent of CFOs say the motivation for M&A will be primarily offensive and geared toward strategic growth. Amid rumors of major media and Internet companies considering initial public offerings (IPOs) and an improved stock market, the vast majority of CFOs (68%) also expect an increase in IPO activity in 2011.
"With liquidity improving and revenue on the rise, technology companies are poised for a strong 2011," said Aftab Jamil, Partner and National Leader of the Technology and Life Sciences Practice, BDO USA, LLP. "After scaling back on R&D and operational expenses during the recession, many technology companies are flush with cash and well-positioned to spend. M&A will be a primary tool for companies looking to boost profitability through strategic growth and increased market share."
These findings are from the fourth-annual BDO Technology Outlook Survey, which examines the opinions of 100 chief financial officers at leading technology companies located throughout the U.S. The survey was conducted in January of 2011.
Other major findings of the 2011 BDO Technology Outlook Survey:
- M&A Activity Ramps Up in Software, Media and Telecom Sectors. With technology giants increasingly buying niche software specialists to expand their offerings, nearly one-third (32%) of CFOs expect the traditional software sector to see the most M&A activity in 2011. Another 30 percent point to the media and telecom sector, followed by biotechnology & life sciences (15%), clean tech (13%) and hardware (10%). Consistent with 2010, increased revenue and profitability remain the most cited primary driver for acquisitions in the industry at 39 percent. Many CFOs also point to increased market share as a primary driver (34%), up from 24 percent in 2010.
- Improved Access to Capital. The vast majority of CFOs (83%) say they feel better about their company’s ability to access capital and credit. Still, threats remain to the funding environment. Sixty-one percent of CFOs say economic uncertainty will have the greatest effect on funding, followed by regulatory and political developments (14%), interest rates (13%) and more competition for funds (8%).
- Private Equity Remains Primary Source of Capital. Forty-three percent of CFOs report that they anticipate seeking additional capital this year, up from 2010 (32%) and 2009 (34%). With equity markets relatively stable and many private equity firms shifting their focus from exits to new investments, most CFOs who plan to raise capital report that they will focus on private equity (43%). Another 31 percent will concentrate on debt, down slightly from 2010 (34%), and 19 percent will focus on public equity.
- Economic Rebound Necessary for Sustained Growth. The majority of CFOs (52%) say continued economic rebound in the U.S. will be the most important factor driving growth in 2011. On the heels of skyrocketing mobile device sales, 19 percent of CFOs say consumer demand for innovative personal technology will be the most important driver of growth, up from 12 percent in 2010. International growth (11%), increased corporate IT budgets (8%) and demand for green technologies and solutions (8%) are also cited.
- Competition is the Greatest Challenge for 2011. With China threatening to outpace the U.S. in patent applications, 40 percent of CFOs point to competition as the greatest challenge they will face in 2011. This marks a notable jump from 2010 when just 15 percent of CFOs cited competition as the primary challenge. Managing risk moves to the second most cited challenge (20%), a significant decline from 2010 (38%). Recruiting and retaining workforce talent (19%) and access to capital (15%) also remain challenges.
The 2011 BDO Technology Outlook Survey is a national telephone survey conducted by Market Measurement, Inc., an independent market research consulting firm, whose executive interviewers spoke directly to chief financial officers. Market Measurement used a telephone survey performed within a scientifically-developed, pure random sample of U.S. technology companies in the software, hardware, telecommunications, internet and information technology services sub-sectors.
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