Bottom Line Looms Large but Confidence Abounds for CEOs of North America's Fastest-Growing Technology Companies Deloitte & Touche LLP Survey Shows.

Business Editors & High-Tech Writers

SAN JOSE, Calif.--(BUSINESS WIRE)--May 21, 2002

CEOs of North America's fastest-growing technology companies are optimistic about the future of the technology sector and are splurging on new employees and marketing and sales strategies, while slashing travel and administrative costs.

The survey of CEOs whose companies were listed on the 2001 Deloitte & Touche Technology Fast 500 was conducted in the First Quarter 2002 by Deloitte & Touche's Technology, Media & Telecommunications (TMT) Group.

"Despite a radically changed technology marketplace, the majority of CEOs of North America's fastest-growing technology companies are optimistic about the future of their companies and the technology industry," said Mark Evans, managing director of Deloitte & Touche's Technology, Media & Telecommunications Group based in San Jose.

"And, they're putting their money where their mouths are by investing in marketing and sales activities, hiring new employees and looking toward strategies that will help contribute to their continued growth, while shaving travel and administrative costs."

62 Percent of CEOs "Very" or "Extremely" Confident in Tech Sector

Sixty-two percent of the CEOs said they are "very" or "extremely" confident that their companies will maintain the high levels of growth they've experienced over the past five years. To put this in perspective, Fast 500 companies' revenue growth rates over five years (1996-2000) ranged from 824 to 115,874 percent.

"The reality is that new technologies and technology-driven products and services will always provide new business opportunities.

"Innovation doesn't suddenly stop just because the business climate goes cold. It simply takes longer for it to surface, spawn new thinking and new business ventures," said Scott Jarus, president of j2 Global Communications Inc., which provides outsourced value-added messaging and communications services to more than 4 million customers around the world.

"Nothing has changed with regard to innovation -- what's changed is how intelligently and well the industry executes on a business plan to leverage the innovation." Based in Hollywood, j2 Global Communications (Nasdaq:JCOM) ranked Number 50 on the 2001 Fast 500.

Twenty-one percent of CEOs surveyed said they are "somewhat" confident about maintaining their five-year growth rates, while only 10 percent indicated that they are "not very confident" or "pessimistic."

Nearly 90 Percent of CEOs Report Plans to Hire New Employees

Eighty-nine percent of the CEOs say they plan to hire new employees, but most are being conservative. Of those hiring, 49 percent anticipate adding less than 25 new employees; 20 percent plan to add 26-49 new employees; and 12 percent expect to hire 49-100 new employees. On the upper end, 6 percent have plans to add 101-200 new employees, while only 2 percent plan to hire more than 200 employees.

Mascon Global Inc. is one of the companies whose CEOs indicate plans to hire more than 200 new employees. Dr. Nandu Thondavadi, CEO of Mascon Global Limited, said: "Since human capital is our major asset, people are what really matter to our balance sheet. The key is to have our work force be as productive as possible."

Mascon Global is a global IT and management consulting company that provides complete outsourced enterprise solutions to organizations around the world. Based in Schaumburg, Ill., Mascon Global ranked Number 5 on the 2001 Fast 500.

Only 11 percent of the CEOs surveyed said they are not hiring new employees or are downsizing.

Employees Remain Biggest Contributors to Company Success

For the fifth consecutive year, CEOs indicated that employees remain the biggest contributors to the company's fast-paced growth. In fact, 30 percent attribute their successes to their employees. However, this figure has fallen after rising steadily over past surveys, from 49 percent in 2001, 39 percent in 2000 and 31 percent in 1999.

"Today's market conditions allow technology companies to hire very good quality employees," Thondavadi of Mascon Global said. "In this context, Mascon is moving fast to hire the best talent in the market and I'm confident that the tech industry will quickly absorb the current supply of excess IT aptitude."

Having exceptional or unique product offerings was the biggest contributor to growth for 29 percent of the CEOs surveyed, while "right market timing" was the major factor of 23 percent of the CEOs, up from 12 percent in last year's survey.

Marketing and Sales Hailed as a "One-Two Punch" Against Economic

Uncertainty

More than a quarter of CEOs surveyed view investments in marketing and sales as a way to stay competitive and continue their fast-paced growth rates. For example, j2 Global Communications recently embarked on a new direct sales channel for corporate accounts.

Jarus said: "Prior to this direct corporate selling effort, j2 only sold its services via its Web channel. While the investment to add a direct sales channel is significant, we are extremely pleased with our success to date and expect the growth rate in our corporate sales channel to exceed that of our Web channel in 2002."

PFSweb Inc. is combining a broad spectrum of media to reach its target audience. CEO Mark C. Layton said, "We've found that the only way to attract the interest of a potential buyer is to market them in a variety of ways continually with subtlety so you maintain a high level of visibility and credibility.

"A strong balance of the right media -- telemarketing contacts, direct mail, personalized e-mail, mass e-mail, print and broadcast media advertising -- is key to getting your potential client to look for your services when they need them."

PFSweb (Nasdaq:PFSW) provides comprehensive outsourcing solutions, delivering fast and secure business infrastructure and technology to enable traditional and e-commerce strategies. Based in Plano, Texas, PFSweb ranked Number 4 on the 2001 Fast 500.

Admin and Travel Costs Are on the Chopping Block

CEOs are taking a long, hard look at general and administrative costs, particularly travel costs, in an effort to reduce overhead. In fact, 27 percent of the CEOs surveyed said they are cutting general and administrative costs, including travel.

"Cutting general and administrative costs, like travel, is easy. The difficult part is to be frugal. That means there has to be intelligence in the cost cutting. Whether the cuts are in general and administrative, R&D, or sales and marketing, there are tradeoffs.

"Management flexibility, the future of the business and immediate sales potential are all considerations," said Michael LeGoff, CEO of Dynex Power Inc., a leading designer and manufacturer of industrial high power semiconductors.

"One way we've cut costs and increased productivity is by adding a network of representatives and distributors around the world to encourage sales. We've also outsourced our available inventory in the sales channel through distribution." Based in Ottawa, Ontario, Dynex Power (CDNX:DNX) ranked Number 14 on the 2001 Fast 500.

The CEOs are also looking for other places to control costs this year. In fact, 12 percent said they are pushing out capital investments to keep the costs under control and put the funds where they can really make a difference.

Resisting the Urge to Merge

A resounding 71 percent of the CEOs surveyed indicated plans to stay the course for the next 12 months. Very few are planning to acquire another company (12 percent), be acquired (6 percent), merge (6 percent), or go public (3 percent).

"To be successful, it's important to keep your eyes on the future of the company and to think about what kind of company it can evolve into. Perseverance is the key.

"At AltiGen, we always think about how you can increase the efficiency of every part of the company to generate more revenue and how you can create more revenue utilizing existing channels," said Gilbert Hu, CEO of AltiGen Communications Inc. (Nasdaq:ATGN), the leading manufacturer of delivered next-generation business telephony, including the IP-PBX market.

Based in Fremont, Calif., AltiGen Communications ranked Number 111 on the 2001 Fast 500.

A Healthy Shakeout

Sixty-two percent of the CEOs attributed the tech sector slowdown to a healthy shakeout of less viable companies that will cause short-term pain but lead to a more robust industry in the next 12-18 months.

"A down economy allows managers to clean house by identifying the strong performers in the organization and letting go of under- performers, which allows for improved efficiency.

"It is healthy to go through this periodically. As an industry, we are going to come out with much better organization and improved efficiency," said Marina Hatsopoulos, CEO of Z Corp., which develops, manufactures and markets the world's fastest 3D printers for physical prototypes from computer-aided design ("CAD") and other digital data.

"We're really excited about the future. Overall, when you have a product that's truly different and solves problems, the outlook is always positive." Based in Burlington, Mass., Z Corp. ranked Number 35 on the 2001 Fast 500.

Nineteen percent felt the slowdown was due to a "hangover" for the excesses of the '90s that will affect the tech sector and economy overall for several years.

The Marketing Challenge

For the first time since the survey's inception in 1998, "finding and hiring employees" falls to the second biggest challenge, with "developing strong marketing strategies" now the biggest challenge for 30 percent of the CEOs. "Finding and hiring employees" was the biggest challenge for just 24 percent of the respondents, down from 39 percent in 2001 and 55 percent in 2000.

"While today's fast-growth tech company CEOs are challenged with marketing, it's a buyer's market for employees," said Deloitte & Touche's Evans. "With the technology shakeout, tech CEOs are now finding they can afford and hire more top quality people than in the recent past."

Twenty-nine percent of CEOs surveyed indicated that "short-term economic conditions" are the biggest marketing challenges to sustaining high revenue growth, followed by "developing and bringing new products to market" for 23 percent of the respondents.

The Struggle for Profitability

Despite the economy, securing funding doesn't seem to be an issue for the majority of the CEOs. Only 16 percent indicated that "raising capital" was their biggest challenge. However, 34 percent of the CEOs said their biggest personal challenge is "achieving and sustaining profitability," followed by "developing leaders and delegating responsibility" for 24 percent of the respondents.

This contrasts with last year's 30 percent of the CEOs who said "managing expectations" was their biggest personal challenge. "Managing expectations" is the biggest personal challenge for just 10 percent of CEOs in this year's survey.

Free Food and Other "Coveted Perks"

While 40 percent of the CEOs offer stock option plans for their employees, 18 percent reduce stress with sought-after perks including on-site massages and gym or club memberships. Twenty-three percent keep their employees well fed with complimentary snacks or meals.

Family benefits have been left in the dust, with only 1 percent offering on-site daycare and 9 percent providing paid family leave.

About the Technology Fast 500 CEO Survey and Program

Findings resulted from a survey, conducted by Deloitte & Touche, of the CEOs at companies listed on the 2001 Deloitte & Touche Seventh Annual Technology Fast 500, a ranking of the fastest-growing technology companies in North America as determined by percentage revenue growth over five years (1996-2000).

The Deloitte & Touche Technology Fast 500 is an annual ranking of the fastest-growing technology companies in North America. The 2002 Technology Fast 500 ranking will be announced in November 2002. For more information on the Technology Fast 500, visit www.fast500.com.

About Deloitte & Touche

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