Tech Firms’ CFOs Less Optimistic About Economy

Chief financial officers (CFOs) at high-tech firms are more pessimistic
about the state of the economy and about their own companies’ financial
prospects than CFOs from other industries, according to a new study by Financial Executives International (FEI) and
Duke University’s Fuqua School of
Business. What’s more, one-third of all high-tech CFOs say their
companies are not at all recovered from the recession.

The latest quarterly “CFO Outlook Survey” does not paint technology CFOs as
a bunch of happy campers who are just waiting to spend money on things like
instant messaging, 802.11, grid computing or ultra wideband networking. “The
technology industry is in a lot of pain,” said Dr. John Graham, Professor of
Finance at Fuqua and director of the survey. “While we’re seeing some
glimmers of a pickup, tech CFOs have let us know that they’re not
envisioning a speedy recovery.”

Technology companies expect an overall capital spending decrease in the next
quarter of .75%. This compares to a revenue-weighted average increase of .3%
across all industry sectors. Of the high-tech firms surveyed, 93% say they
are spending cautiously or holding off on all or nearly all capital
investments, and only 7% are spending at a normal rate.

Technology companies expect an overall capital spending decrease in the next
quarter of .75%. This compares to a revenue-weighted average increase of .3%
across all industry sectors. Of the high-tech firms surveyed, 93% say they
are spending cautiously or holding off on all or nearly all capital
investments, and only 7% are spending at a normal rate.

In terms of technology spending next quarter, the average increase among all
companies is expected to be a modest 1.9%. Tech companies, tracking the
larger group, expect to increase their tech spending by 1.6%.

About one-third (33%) of technology-company CFOs are more optimistic about
their companies’ financial prospects than last quarter, but an almost equal
number (30%) are less optimistic. In terms of their optimism about the US
economy, only one-quarter (26%) were more optimistic and 40% were less so.
Technology CFOs had the lowest “more optimistic” and the highest “less
optimistic” percentages across all industries.

Thirty-seven percent of high-tech CFOs, meantime, said their companies were
“not at all recovered” from the recession — the highest percentage of any
industry group. Only 2.3% said they were completely recovered. Twenty-three
percent said they are “beginning” their recovery; another 23% are
“moderately” recovered; 7% are “well on the way to recovery”; and another 7%
“never slowed down.”

Technology company CFOs say that their companies’ third quarter earnings
will be higher than the second quarter’s, but they expect an average
increase of just 4.9% — in the low range of earnings expectations. The
revenue-weighted average increase expected across all companies is 14.4%.

Despite an expected tightening in capital spending, technology companies
anticipate to increase their inventory by 2.9% next quarter. Technology was
the only industry planning an increase; across the board, overall inventory
is expected to decrease by 1% next quarter. Tech companies also expect to
raise the prices of their products 2.6% — on average, the highest of any
industry.

Tech companies expect employment to fall .6%. When hiring, perhaps not
surprisingly, 70% say it is not difficult to find qualified workers, the
survey added.

Forty three, or 12% of the 358 companies that participated in the survey
were in the technology industry. The survey itself was taken during the
second week of June via an Internet-based poll. Among the industries
represented are retail/wholesale, mining/construction, manufacturing,
transportation/energy, communications/media, technology,
banking/finance/insurance, and services/consulting.

Bob Woods is the managing editor of InstantMessagingPlanet.