CFOs Expect Higher Revenues and More MandA in 2011

A survey of 100 technology CFOs by consulting company BDO found that the executives are much more confident about their organizations' revenue outlooks and strategy.

Chief financial officers at technology organizations are much more optimistic about the outlook of their business than they have been in years past, according to the results of a research report released Feb. 2.

A majority of the CFOs said they expected revenues at their organizations to go up in 2011 in the survey, according to BDO, an accounting and consulting organization based out of Chicago. The fourth annual "BDO Technology Outlook Survey" surveyed 100 CFOs at "leading technology companies" in January and asked about mergers and acquisitions, initial public offerings, and company performance.

"The CFOs overall had a great deal of higher sense of optimism," Aftab Jamil, partner and national leader of the technology and life sciences practice at BDO, told eWEEK.

After 2009 and 2010 where everyone was "hunkered down" just trying to weather the storm, the change in attitude was a welcome change, according to Jamil. While "we are not out of the woods yet," the optimism indicated there would be more activity and focus on growth in 2011, he said.

A majority of the 77 percent of CFOs expect revenues to increase in 2011 by an average of 10.37 percent, said Jamil. It was "great to see" such a positive outlook, Jamil said, noting that only two percent thought revenues will go down. The remainder expected revenues to stay about the same, according to the report.

CFOs have increased sense of confidence in their strategy, where the business is going, and are willing to execute on various plans and projects, according to Jamil. CFOs tend to be very conservative and are more likely to commit to new investments if they see a potential for growth, rather than "just making do with what they've got," Jamil said.

About 78 percent of the CFOs said they expect an increase in mergers and acquisitions activity in the technology sector in 2011. The numbers are actually pretty similar to 2010, where about 81 percent expected an increase in M&A activity. The CFOs also indicated that M&A will be more likely to be offensive, in that organizations will be looking at acquisitions as a way to gain market share, increase revenues, or gain technology, Jamil said. A defensive strategy would mean companies were looking at mergers to just survive or retain market share, he said.

These executives felt that software companies and telecommunications organizations were likely to see the most M&A activity in 2011, according to the report. Hardware companies were expected to see the least, followed by clean technology and biotechnology.

A majority of the company CFOs had a sense of having better access to capital even though there was still a lot of economic uncertainty, Jamil said. The capital could be through financing, venture capital, or IPOs, he said. While most, at 57 percent, of the executives said they didn't anticipate looking for new capital in 2011, about 59 percent felt better about the chances of the company raising funds, according to the report. About 43 percent indicated they were likely to look for private equity.

Only a third of the CFOs are willing to take on additional debt as a way to get more cash, Jamil said.

About 68 percent of the survey participants felt there will be more technology IPOs in 2011, while 25 percent thought it would remain about the same, according to the report.

"The stock market is doing well and that always has a wonderful impact on the psyche," Jamil said.