Tech Companies Now More Confident in Their Financial Health

Confidence in the financial health of players in the IT and telecoms sectors has returned over the past six months, with only 19% expecting finances to deteriorate, according to the latest Tech Sector Barometer, a bi-annual survey published recently by the Economist Intelligence Unit.


The study finds that nearly three out of five of the IT and telecoms senior executives surveyed say they expect demand conditions to improve over the next six months. This reflects a sharp reversal in sentiment from the first quarter of this year when just one in five expressed optimism. Only 9% of those surveyed now expect demand to deteriorate, as opposed to 47% in the first quarter.


The survey, Looking Up, also shows a sharp regional split. Asian executives show the most confidence globally. Europeans show the least. This finding reflects the EIU's global economic outlook, which forecasts world GDP growth of 2% next year, but an expansion in Asia of 3.7% compared to just 0.5% growth in Western Europe.


Although nearly every indicator in the survey has turned positive, the EIU expects the recovery for the IT and telecoms sectors to be a long, hard slog. "While confidence has bounced back, it takes more than confidence to build a solid recovery," comments Carla Rapoport, Director, Industry Briefing, at the EIU. "The most encouraging sign in this survey is that R&D spending is picking up again."


According to the EIU, optimism in the IT and telecoms sectors reflects a growing sentiment that the worst of the recession is now over, with 59% of those surveyed expecting demand conditions to improve over the next six months, compared to just 20% in the first quarter. Only 9% now expect demand to deteriorate, compared to 47% in the first quarter.


Asian tech executives are the most optimistic, with 77% of those surveyed anticipating improved demand conditions, followed by North America with 66%.


In the R&D side, investment is picking up, with 35% of all respondents expecting an improvement in R&D spending over the next six months. A further 46% expect R&D budgets to be maintained.


Meanwhile, downward pressure on prices is now the biggest barrier to growth, with reduced demand the second most cited reason for slower growth.

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