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DLA Piper 2008 technology leaders forecast survey reveals concerns and opportunities in the current economic environment

55% of Tech Leaders See IPO Market Stalled Until 2010 or Later; VC Leaders See Current Crisis Eclipsing the Tech Bubble Burst of 2000

Press Release
(East Palo Alto) – In the midst of a financial and economic crisis, and in the midst of uncertainty associated with a historic presidential election, the DLA Piper 2008 Technology Leaders Forecast Survey found that industry leaders have a host of concerns, but are fundamentally optimistic about future opportunities.

The survey, measuring the attitudes and perspectives of top executives within the technology industry, reveals that 75% of respondents say they have been adversely affected by the economic slowdown. Only 15% of respondents think the U.S. economy is likely to rebound in the first half of 2009 and more than half of respondents (55%) believe the IPO market will not begin to rebound until at least 2010. With responses received between September 23 and October 6, the survey was conducted as Congress debated the $700 billion bailout bill and during a tumultuous two weeks on Wall Street.

“Approximately 90% of respondents do not believe the IPO market will return until at least the end of 2009 which is not surprising given the extent of the current economic crisis and the shutdown in the IPO market that occurred following the Tech Bubble Burst in 2000,” said Peter Astiz, Global Co-Head of the DLA Piper Technology Sector Practice.

“On an operating level, we asked technology executives how they expected the economic crisis would impact their business. Almost two-thirds of respondents said they expect their revenues to decline as a result of the economic crisis. However, in a clear sign of optimism over their medium and long term prospects, only a quarter of respondents indicated they are reducing their sales and marketing expenses, and even a smaller percentage of executives were planning on cutting their research and development expenses. This seems to indicate a belief that the impact on the technology sector will be more short term in nature and that companies plan to continue to strategically invest in their businesses,” added Astiz.

VCs and Tech Company Executives Differ

Respondents deploying capital (Venture Capitalists) reflected a much different view of the financial crisis than those needing capital (companies themselves), which is understandable given that VCs have a greater focus on exit strategies. Nearly half (47%) of finance and venture capital respondents say the current financial crisis will have a more adverse impact on the technology industry than the Technology Bubble Burst of 2000. However, 67% of technology company entrepreneurs and leaders disagree.

“Two-thirds of technology executives surveyed told us that the current crisis would not be as severe as the Tech Bubble Burst of 2000. Those responses reflect an opinion that the impact of the current crisis on the technology industry is more residual than the 2000 crash,” noted Astiz. “However, of the respondents focused on venture capital, about half said the current crisis would be more severe. We think the difference between the two groups was largely due to the emphasis of Venture Capitalists on exit issues such as M&A and IPOs – which are likely to be more adversely impacted in the near term – than longer term operating results.”

The survey yielded a number of other interesting conclusions, including:

• 85% of respondents think we are in for another year or more of the current economic conditions, signaling a collective view that the present financial challenges are not a short-term phenomenon.
• Clean technology is one of the bright areas amid the financial crisis and economic turmoil, with tech leaders believing the sector will get a boost given the continuing economic and political pressure towards greater U.S. energy independence.
• With almost 90% of respondents saying the Chinese consumer market is an exploitable opportunity, technology industry executives still believe China represents a significant opportunity as both an end market and a supplier.
• Almost half of all respondents (48%) do not have an open source software policy, which experts warn could open them up to legal exposure.
• While there continues to be considerable discussion about innovation coming out of emerging markets, 55% of respondents think the US will still lead in producing the next generation of “leap-frog” technologies in the coming decade.