Most Chief Financial Officers (CFOs) in US technology firms predict revenue growth of over 10 percent for 2011, according to a report by BDO USA.
The study found that 77 percent of CFOs in major US technology companies expected a sizeable increase of 10.4 percent in revenue this year. This is up from previous forecasts for 2010 at 9.7 percent and 2009 at only 1.6 percent, suggesting economic recovery is well underway.
There are also expected to be rises in the merger and acquisition (M&A) area, with 78 percent of CFOs expecting there to be increases. Twenty-three percent believe the increases will be “significant” over those of 2010.
The software sector was seen as the most likely to see high M&A activity, according to 32 percent of CFOs, while media and telecom follow close at 30 percent. Biotechnology and life sciences were at 15 percent, clean technology was at 13 percent and hardware was at 10 percent.
Increased revenue and profitability was seen as the most common reason for acquisitions, according to 39 percent of CFOs. The second major reason was increased market share, with 34 percent of the vote.
Despite this expected growth, KPMG saw falls in M&A Price-to-Earnings ratios for all sectors, including technology, which fell at a much smaller rate of three percent, as we reported earlier. 2011 may present a turnaround for revenue increases through M&A.
More companies are expected to go public in 2011, leading 68 percent of CFOs to predict a big increase in initial public offerings this year. LinkedIn announced its plans to go public at the end of last month and many believe that Facebook and others will follow suit.
Economic fears are quickly becoming a thing of the past for most technology companies, with 83 percent of CFOs confident with their ability to get access to capital and credit. Over half believed that the ecnomic recovery in the US would be the largest factor in driving growth this year. In contrast to this, 61 percent believe the economy can still hinder funding.
Forty-three percent of CFOs revealed their intention to seek extra capital in 2011, up considerably from 2010 and 2009, where the figure was 32 percent and 34 percent respectively. Most of these, 43 percent, will gain capital through private equity.
Competition will also be a major challenge for companies in 2011, thanks to swift advances made in China. 40 percent believe China’s ability to outpace the US in terms of patent applications will be a primary hurdle to overcome this year, while risk moves, a usually high-ranking challenge, was down to 20 percent in second place.