UK TMT: Staying smart in a downturn - UK.COM

4UK TMT: Staying smart in a downturnExecutive summaryThere is a surprising amount of optimism in theTechnology, Media and Telecoms (TMT) sector,in spite of the challenges of doing business duringthe downturn. TMT companies are trying toprotect themselves against inevitable threats -falling customer demand, increasing competitionand shrinking credit availability. In doing so, theyaren’t fixating on short-term reactive measures,such as selling assets, outsourcing, or cutting backon R&D spending, and they have also turned awayfrom their former inclination for M&A. Their focusnow is on innovation, tapping into new marketsand strategic partnering. Indeed, the majority ofrespondents are confident of meeting their longertermgrowth targets. Here are the key findings:Innovation and strategicpartnerships have replacedacquisition as top growth strategiesInnovation has emerged as the main growthstrategy among UK TMT companies. 31% say thisis their top strategy for growth, compared witha mere 5% a year ago. This could also explainwhy 80% of respondents don’t plan to cut R&Dspending. The rise of innovation as a favouredchoice of growth strategy reflects current marketrealities, in which merger and acquisition activityhas been severely curtailed by a lack of funding.In keeping with this, UK TMT companies’ appetitefor M&A has lessened considerably since ourprevious research. At the same time, strategicpartnerships are looking a lot more likely: 15% ofrespondents cite partnerships as their top threeyeargrowth strategy, compared with just 5% atthe end of 2007. Recent high-profile examplesreflect this trend.Slim growth in the next year, but threeyeargrowth targets remain unchangedThe recession is carrying a sting for TMTcompanies, but in their view, it’s a short-term one.40% of respondents forecast 0-5% growth in the>About this reportIn January 2009, CFO Europe Research Services, a unit of CFOPublishing and part of The Economist Group, began a researchproject with BDO Stoy Hayward, the UK member firm of BDOInternational.This report is based on the results of an online surveycompleted by 78 UK-based senior executives working in theTechnology, Media and Telecommunications (TMT) sector. Weasked about companies’ growth strategies, access to capital,and the impact of the economic downturn. In this report, wecompare the most recent findings with those from a similarsurvey conducted at the end of 2007, the results of whichwere published in a report entitled “Delivering fast-growthstrategies in challenging times” in April 2008.CFO Europe Research Services and BDO Stoy Haywarddeveloped the scope of the research jointly. BDO Stoy Haywardfunded the research and the publication of our findings, and wewould like to thank their team for its insight and support. AtCFO Europe Research Services, Emily Williamson managed theproject and wrote the report.UK TMT: Staying smart in a downturn is published byCFO Europe Research Services, 25 St. James’s Street,London, SW1A 1HG, UK. Please direct any enquiriesto Emily Williamson on +44 (0)20 7830 7000 or atemilywilliamson@cfoeurope.com.coming year, while 16% forecast negative growth.The three-year outlook, however, looks morepositive, and is largely in line with the results ofthe December 2007 survey, with around threequartersof respondents forecasting annualrevenue growth of up to 20% in the next threeyears, and around a quarter forecasting growth ofover 20%. The confidence in longer term growthreflects a belief that innovation strategies andR&D spending will succeed in driving profits in2010 and beyond.CFOs are less optimistic abouthitting their targetsAlthough nearly two-thirds of respondents areconfident that their companies can meet theirrevenue growth targets for the next three years,this is still an 18 percentage point drop from theApril 2009© 2009 CFO PUBLISHING CORP.