BDO Seidman, LLP - Accountants and Consultants

SAN FRANCISCO, CA –  According to a new survey by BDO Seidman, LLP, one of the nation’s leading accounting and consulting organizations, almost half (49%) of all chief financial officers at U.S. technology businesses surveyed feel they are at a competitive disadvantage to their foreign counterparts due to a new accounting rule that allows foreign competitors to report their financial results under International Financial Reporting Standards (IFRS), without reconciling the figures to U.S. Generally Accepted Accounting Principles (GAAP). When asked which financial reporting standards provide better revenue recognition rules for technology businesses, by a ratio of over three-to-one, sixty-nine percent of CFOs cited U.S. GAAP compared to only a fifth (21%) for IFRS. Given the opportunity, over a third (38%) of these CFOs would switch to IFRS in order to level the playing field with their international competitors.

Almost three quarters (73%) of CFOs at leading U.S. technology businesses expect to post increased sales revenue in 2008 over 2007, while fifteen percent are forecasting flat sales and only six percent believe they will experience a sales decline in the coming year.  Of those predicting an increase, CFOs are forecasting ten percent growth in 2008 as compared to 2007, while CFOs in technology companies based in Silicon Valley predict fifteen percent growth in sales revenue.

These findings are from the BDO Seidman 2008 Technology Outlook Survey which examined the opinions of 100 chief financial officers at leading technology companies located throughout the U.S. including a subset in the Silicon Valley.  The technology businesses in the study had revenues ranging from more than $100 million to $15 billion including companies in the software, hardware, telecommunications and internet sub-industries. The survey was conducted in January of 2008. 

“As advisors to technology businesses, we created the BDO Seidman Technology Outlook to provide a highly-accurate barometer for measuring the opinions of financial executives at the premier technology firms in the U.S. This inaugural survey reveals broad-based optimism among these CFOs for revenue growth and continued merger and acquisition activity in 2008,” said Jay Howell, a Partner in BDO Seidman’s Technology Practice.  “However, the survey also revealed concerns among the CFOs about a new accounting rule they believe places U.S. technology businesses at a competitive disadvantage to their foreign counterparts.  The new rule, while well intentioned, has unintended consequences for U.S. technology businesses in the area of revenue recognition.”

Other major findings of the 2008 BDO Seidman Technology Outlook:

* Growth Drivers.  Over a third (39%) of the CFOs cited consumer demand for innovative personal technology as the greatest driver of growth in the industry in 2008, closely followed by a third (32%) who indicated that international expansion would be the main driver. Seventeen percent cited increasing IT budgets as the greatest driver of growth in the industry.

* Challenges.  The ability to recruit and retain talent (38%) is seen as the greatest challenge for the coming year, with risk management (23%) finishing second, followed by access to capital (15%), financial reporting and corporate governance issues (14%) and foreign competition (9%). Businesses based in Silicon Valley strongly believe that recruiting and retaining talent (55%) will be the greatest challenge for the coming year as well, but they were only one third as likely as companies not based in Silicon Valley to see risk management as the greatest challenge for the coming year (only 9% vs. 27% outside the Silicon Valley).

* M&A Activity Continues.  Most CFOs anticipate that merger and acquisition activity in the tech sector will either pick-up (41%) or stay about the same (42%) in 2008.  Only seventeen percent see M&A slowing down in this vertical.  Companies based in Silicon Valley were even more optimistic, as fifty-nine percent of CFOs believe that merger and acquisition activity in the tech sector will pick up, compared to only thirty-six percent of companies not located in Silicon Valley. According to these CFOs, the primary drivers behind acquisitions in today’s technology market are increasing revenue and profitability (37%), expanding market share (26%) and acquiring technology assets (24%).

* Limited Pursuit of Capital.  Only twenty-seven percent of the CFOs expect their businesses to seek additional capital in the coming year.  In fact, most Silicon Valley CFOs (86%) do not anticipate seeking additional capital in the coming year.

About BDO Seidman, LLP

BDO Seidman, LLP is a national professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. Guided by core values including, competence, honesty and integrity, professionalism, dedication, responsibility and accountability for almost 100 years, we have provided quality service and leadership through the active involvement of our most experienced and committed professionals.

BDO Seidman serves clients through 35 offices and more than 300 independent alliance firm locations nationwide. As a Member Firm of BDO International, BDO Seidman, LLP serves multi-national clients by leveraging a global network of resources comprised of 621 Member Firm offices in 110 countries. BDO International is a worldwide network of public accounting firms, called BDO Member Firms, serving international clients. Each BDO Member Firm is an independent legal entity in its own country. www.bdo.com

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