IT execs say learned the lessons of dot.com crash
BARCELONA, Nov 21 (Reuters) - Technology executives told a conference this week they learned lessons in the dot.com crash that wiped $5 trillion off tech stocks at the start of the century that would help them through current difficulties. Queuing up to make investment cases for their companies, executives said the experience had left them in better shape to survive a coming recession than other sectors that had not suffered in a similar way.
"We had a telecoms crisis in 2001, and I think a couple of learnings that we had at Ericsson are important and valid to keep in mind," Chief Financial Officer Hans Vestberg told Morgan Stanley's Technology, Media and Telecoms
conference. "Focus on cost, regardless of what's happening ... That we learned from 2001, and we keep that in our minds," he said. "You saw that in the last 12 months we have been very focused on cash generation ... That, we will continue."
The themes of generating cash, cutting costs, diversifying customer bases and increasing the proportion of recurring revenues were echoed by companies in businesses ranging from software to telecoms to IT services.
Leo Apotheker, co-chief executive of business software giant SAP pointed to the company's 40 percent of sales that come from steady sources such asmaintenance and services today -- double the proportion it had in 1998.SAP finally showed the scars of global economic pressure in the third
quarter, warning last week that sales had fallen off dramatically in the last two weeks of September.UK-based Autonomy, whose software helps companies comply with financial regulations, also raised its recurring revenues to 50 percent of sales from 25 percent in 2002.
But by the time Ericsson's presentation came on day two, some investors had heard enough of the same old story."Most companies looking to the next 12-18 months are going to be focused on costs, and they're going to be focused on cash," said one.
"So are there any specific other examples you would give about your lessons from last time that would make you much better positioned?"
Autonomy, whose meaning-based search software helps companies mine documents sometimes stored in multiple formats and thousands of different
depositories, said it was positively profiting from the global economic crisis."Financial services turmoil is very good for us. Financial services customers are having to buy a lot of software to become compliant,"
Chief Executive Mike Lynch said. "We're not seeing the kind of effects that SAP reported in the quarter." Among telecoms companies, both smaller players like Sweden's Tele2 and giants like Telefonica said they would emerge winners.
"When you're thinking of reducing your phone bill, we're supposed to be the first place to come to. We're lowest priced," said Tele2 Chief Executive
Harri Koponen. Telefonica Chief Financial Officer Santiago Fernandez Valbuena argued incumbents and market leaders would turn out to be winners in times of trouble by being more flexible on costs and capital spending.
INFORMATION AGE RECESSION
Andy Green, CEO of British IT services company Logica , also argued that size mattered, but precisely because this recession would be nothing like that of 2002."Fundamentally there was something very different about the 2002/03 recession to all the others, and that was that it was a tech-led recession," he said. "We were all sitting in our boardrooms and thinking: 'Bloody hell, this dot.com, ecommerce stuff, which we all understood nothing about ... and thinking, 'Can we afford not to?', and we were spending money." "And there were certainly enough people in every boardroom who thought it was a bunch of tosh. As soon as things blew up, people went for the hatchet and really cut back very hard." Today, customers of IT firms know better what they want."Being a small niche player with great ideas was a super business in 2002. In today's market ... larger players like ourselves are definitely favoured," he argued, adding that scale for global procurement and recruitment was also crucial.
Today's faster communications might, however, spell a swifter end when the end comes, he said, as the world acts in a more coordinated way. "This is the first global recession of the information age," Green said. "That means you're probably going to go steeply in and hopefully steeply out."