Growth, Profits Become Focus for Tech CEOs

Maintaining growth and building profitability have become the top focus of CEOs at North American technology companies, according to a survey by Deloitte & Touche. The survey was conducted during the first quarter of 2001 among the CEOs of the companies on Deloitte & Touche’s Fast 500 list of the fastest growing technology companies in North America.

“In these economically uncertain times, CEOs of technology companies are changing their strategies for success,” said Mark Evans, managing director of Deloitte & Touche’s Technology & Communications Group. “They are buckling down, focusing on making profits, looking at consolidation opportunities, expanding their markets globally and focusing on attracting and retaining the right people to help them find new ways to succeed in a down market.”

More than one-third (37 percent) of the CEOs surveyed responded that they have no plans to merge, acquire or be acquired within the next 12 months. Less than 10 percent said they planned to do an IPO in the next 12 months. Last year’s survey found 15 percent of the CEOs planned to go public in that same time frame. Being acquired has also decreased as a goal for the CEOs. Just over 8 percent of those surveyed in 2001 indicated they planned for their companies to be acquired within 12 months, down from 27 percent in 2000.

“In today’s market, CEOs can’t count on building up their companies for a quick sale anymore,” Evans said. “They’re focusing on being as profitable as they can, making acquisitions and strengthening their own companies with a vision toward long-term success.”

Plans to acquire another company, on the other hand, have increased dramatically. Nearly one-third (32 percent) of the CEOs surveyed said they plan to acquire another company in the next 12 months, up from just 3 percent in 2000.

Although many have plans to make acquisitions, close to one-third of the respondents cited lack of capital as the biggest obstacle to growing their businesses. Company profits, if they have them, are often the best source of capital when funding is scarce.

Tech CEOs are also taking a global view of their marketplace. Nearly half (47 percent) of the CEOs surveyed said they are looking to China and Western Europe as new markets. Twenty-four percent are looking to China, compared to eight percent for Asia-Pacific (including China) cited by CEOs in the 2000 survey. Nearly one-quarter of the CEOs are focusing on Western Europe, compared to 10 percent in 2000. North America still accounts for the greatest single target market with 30 percent of CEOs calling it the key market to watch over the next five years. Eighty percent made that assertion in 2000.

For the fourth consecutive year in the survey, North American technology CEOs credited having qualified employees as the biggest contributors to their companies’ success. Despite recent layoffs in the technology sector, nearly 39 percent of the CEOs reported it is a challenge to attract and retain qualified employees, down from 55 percent in 2000. Thirty-one percent of the CEOs also called the shortage of qualified workers their biggest obstacle as they continue to grow their businesses. Almost three-quarters (74 percent) said, geographically, a larger pool of tech talent would ease their growing pains. The next biggest concern — the need for tax breaks — was mentioned by just 11 percent of the respondents.

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