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 Technology Disaster II: The Sequel
As the rest of the world reels from the first real economic mess in 20 years, we technology industry folks cannot believe we are back here so soon. We just got out of the bottom of our cycle in 2004. The swoon is back so soon? Didn’t we just go through this disaster movie?
As you batten down the hatches for the storm that is upon us, I am sure you have had your fill of pundits telling you how to survive:
- Did you "right size" your company for the coming sales slump? Check.
- Have you looked at creative ways to finance your company? Check
- Have you hunkered down to out-innovate your competition while sales slow down? Check
The consensus seems to be that 2009 will be dismal globally. But that is the key word, "globally". Some companies are in hot technology areas that seem to be defying the global recession. If the niche your company sells into remains strong, perhaps growth remains an option. Even if it is not a hot market next year, you can take share from your rivals. I recall a statistic from the telecom bloodbath in 2001. The global telecommunications equipment and software market dropped almost 40% from $600B in 2000 to $350B in 2001. Companies collapsed, share prices plummeted. People were lighting their hair on fire and proclaiming the end of an industry! Whoa. It was a collapse, but a $350B global market is still a pretty huge market, especially for new entrants to the market. Similarly in this downturn, if you followed the stock market only, you might think that RIM was doomed and the cell phone industry was about to end. Indeed there may be the first decline in annual sales of the cell phone market globally. Instead of 1.2B phones, the market might only be 1.15B phones. Only. Nokia has the right attitude... they will take share from others to make their numbers better in 2009.
What about M&A? Now is not a good time to be selling. Duh. But not for the reason you are thinking. If you have a good company that is well capitalized heading into this storm, then you will not sell because you will not get your price. But big technology companies with strong balance sheets, which is almost all of them, have been bargain shopping. They are buying distressed companies at low values. They are buying start-ups whose investors are still rolled up in a ball under their desks sucking their thumbs and not handing out any more money. If you are in a position to buy, do what Sierra Wireless did in these dark days... buy. With realism in the market, you can invest now and make hay when the sun shines later.
In early January, technology companies will take stock of what happened in 2008. Hopefully your board room is not like the last scene in a disaster movie, where everyone is wearing torn clothes, have bloodied bandages and are hugging each other in consoling manner. I encourage you to not look back, clean yourselves up and start planning on how to take advantage of 2009.
By Brent Holliday, Technology Practice, Capital West Partners. Brent can be reached at:brent@capwest.com
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