Cobalt, the corporate finance Technology, Media and Telecoms (TMT) specialist, has today announced the findings from its 2008 TMT Winter Survey. The second annual survey of the TMT sector is said to highlight a stark contrast between the prospects for the economy and for businesses in the sectors.
Over 100 TMT sector CEO's and board representatives were surveyed revealing that the majority (64%) believes the impact of this recession on the sector will not be worse than the 2000/2001 when the sector suffered its own ‘recession' in contrast to the rest of the economy at the time.
The overall findings reveal that expectations regarding the economy and potential depth of the recession have of course worsened, but the impact of the recession on the sector is expected to be largely neutral with as many winners as losers.
Remarkably, 91% also believe that their sales figures for 2009 will be static or better than that experienced in 2008, and half of them (50%) claim no material impact from the credit crunch to date.
Chris Williams, Partner at Cobalt Corporate Finance commented, ‘It is encouraging to see this resilient view coming from the technology, media and telecoms industries. The younger businesses in these vibrant sectors might be expected to be perennially positive for their own prospects but the overall response reflects significant maturing of the sectors since the ‘90s, with improved cashflows and stronger balance sheets'.
However this does not mean that the industry will not be affected by the recession. A prolonged recession is seen by 65% of those surveyed as the principle threat to their sector, whilst the lengthening of customer payment terms or failure to pay altogether was selected by 52% as the second greatest threat. Interestingly, the endemic threat of disruptive technologies upon sector incumbents is highlighted by only 20% as a primary threat.
While the majority (51%) believed the debt squeeze would not affect their business plans, many are anticipating a tough 2009 with 63% believing the recession will end in 2010. This is reflected in anticipated employment levels with the majority (54%) expecting reductions in 2009, a dramatic shift compared to a year ago when 44% believed that employment levels would continue to grow throughout 2008.
As regards government, confidence does not appear to have benefited from the state rescue package for the banking sector with 36% of businesses seeing the increased role of government and regulation as a material threat.
On the global stage, the rise of Asia for opportunities has been reversed since last year with China and India dropping by 25% and 16% respectively with a reversion towards traditional markets lead by Western Europe (37%) and North America (27%).
Chris Williams continued, ‘Comparing these findings with last years' survey, it is clear that general confidence has declined, but less than might have been expected. There is no overwhelming prediction of a collapse, as seen in 2000/2001. While the next year is undoubtedly going to be tough, the sector sees it as a slow down with some winners and losers but with most of the industry quickly digging in for a recovery in 2 to 3 years.'