CEOs of North America's Fastest Growing Technology Companies Hunker Down to Business during Economic Slowdown, Deloitte & Touche LLP Survey Shows.

Business Editors

SAN JOSE, Calif.--(BUSINESS WIRE)--May 22, 2001

CEOs of North America's fastest growing technology companies are battening down the hatches and focusing on maintaining their growth and building profitability, according to a survey of CEOs whose companies were listed on the Deloitte & Touche Technology Fast 500.

The Fast 500 CEO Survey was conducted in the first quarter 2001 by Deloitte & Touche's Technology & Communications Group.

"In these economically uncertain times, CEOs of technology companies are changing their strategies for success," said Mark Evans, managing director of Deloitte & Touche's Technology & Communications Group based in San Jose. "They are buckling down, focusing on making profits, looking at consolidation opportunities, expanding their markets globally, and focusing on attracting and retaining the right people to help them find new ways to succeed in a down market."

CEOs Focusing on Operations, Deferring IPOs, and Not Looking to Be Acquired

Thirty-seven percent of the CEOs surveyed responded that they have no plans to do an IPO, merge, acquire or be acquired within the next 12 months. In fact, less than 10 percent said they planned to do an IPO in the next 12 months. This is a notable reduction from last year's survey in which 15 percent of the CEOs indicated they planned to go public within 12 months.

"This is not the year to go public," said Thomas C. Mrva, CEO of Lighthouse Computer Services Inc., an Internet company that ranked No. 18 on Deloitte & Touche's 2000 Fast 500. "It's time to fine tune your strategies and focus on profitability." Mrva has no plans to take Lighthouse Computer Services public this year. Lighthouse is based in Lincoln, R.I.

Being acquired has also decreased as a goal for the CEOs. Just over 8 percent of CEOs surveyed in 2001 indicated they planned for their companies to be acquired within 12 months, down from 27 percent in 2000. "In today's market, CEOs can't count on building up their companies for a quick sale anymore," Evans said. "They're focusing on being as profitable as they can, making acquisitions, and strengthening their own companies with a vision toward long-term success."

CEOs Cite Plans for Growth through Acquisitions

Plans to acquire another company, however, have increased dramatically. Thirty-two percent of the CEOs surveyed said they plan to acquire another company in the next 12 months, up from just 3 percent in 2000.

"As CEOs, our first priority is to maintain profitability and a steady revenue stream," said Thomas Noonan, CEO of ISS, a software company that ranked No. 5 on Deloitte & Touche's 2000 Fast 500. "In this economy, it may mean that you have to consider acquiring another company in order to deliver innovative products and services to market more quickly than you could have done it alone." ISS is based in Atlanta.

Despite their plans to make acquisitions, a lack of capital is cited by close to a third of respondent CEOs as the biggest obstacle in growing their businesses. According to Evans, companies may need to be their own sources of funding for growth in tough economic times. "Company profits can be the best and most accessible resource for growth when capital is scarce," he said.

Global Market is Beckoning, but North America Remains the Major Focus

CEOs are also taking a global view of their marketplaces. Forty-seven percent of CEOs surveyed said they are looking to China and Western Europe as new markets. Of that, 24 percent are looking to China, which is triple the 8 percent for Asia Pacific, including China, cited by CEOs in the 2000 survey. Just over 23 percent are focusing on Western Europe, more than double the 10 percent cited in 2000. However, North America still accounts for the greatest single target market with 30 percent of CEOs saying that this is the key market to watch over the next five years. This is down significantly from 80 percent in 2000.

"There's no doubt that it's a global market these days," said Louis Hernandez Jr., Chairman & CEO of Open Solutions Inc., a software company that ranked No. 80 on Deloitte & Touche's 2000 Fast 500. "You can't think just in terms of selling in the United States anymore when opportunities abound in Western Europe and China, particularly in the areas of wireless and telecommunications." Open Solutions is based in Glastonbury, Conn.

Deloitte & Touche's Evans concurs. He said: "The world's business players are tied together economically in a way never seen before. The United States stock market affects European and Asian stock markets and vice versa, and with this global economy, a strategic, well-timed approach will be essential to reaching new levels of success."

Qualified Employees are Biggest Factor to Success, 49 Percent of CEOs Say

For the fourth year in a row, CEOs credited having qualified employees as the biggest contributors to their companies' success. Now, with the market downturn, qualified employees are more important than ever before. In fact, 49 percent of CEOs surveyed in 2001 said high-quality employees are the biggest contributors to the success of their companies, up from just 39 percent in 2000 and 31 percent in 1999. "The right employees play the biggest role in determining a company's success," said Michael J. Brown, CEO of Euronet Worldwide, a software company that ranked No. 2 on Deloitte & Touche's 2000 Fast 500. Euronet Worldwide is based in Leawood, Kan.

However, despite recent layoffs in the technology sector, nearly 39 percent of the CEOs reported that it's still a challenge to attract and retain qualified employees, down from 55 percent in 2000. In fact, many of the CEOs surveyed said for them, it's a bigger challenge than ever to attract and retain employees that are qualified, fit the company culture, and bring the right dynamic to the company.

Thirty-one percent of the CEOs also noted that a shortage of qualified workers is their biggest obstacle as they continue to grow their businesses. This is particularly true regionally. In fact, 74 percent of the CEOs surveyed cited that geographically, a larger pool of tech talent would ease their growth pains. This concern is an overwhelmingly larger issue than the next biggest concern, the need for tax breaks, mentioned by just 11 percent of the respondents.

In a market of economic uncertainty, job insecurity and seemingly worthless stock options, companies have to be even more creative in offering perks that will make their best employees want to stay on board. Charlie Thomas, CEO of Net2000 Communications Inc., said: "As a service provider, our employees are our most strategic asset. As such, we have worked hard to differentiate Net2000 from other telecoms in our efforts to recruit and retain the best talent available. In addition to creating a very appealing company culture, we offer free BMWs (under a three-year lease) to employees who have excelled for two consecutive years. We believe that this has reduced our external recruiting costs by over $1 million annually, while also keeping our annual employee turnover below 18 percent." A communications company based in Herndon, Va., Net2000 ranked No. 194 on Deloitte & Touche's 2000 Fast 500.

Among other perks being offered by Fast 500 companies are performance-based bonuses and incentives, company-wide vacations and on-site food service.

Managing Expectations is CEOs' Main Concern, but Managing Risk is Gaining

Thirty percent of CEOs surveyed said that their single biggest personal challenge is managing expectations, although managing risk is an increasing challenge in the current economy. In fact, managing risk was the biggest challenge to 21 percent of the CEOs, up from just 17 percent in 2000.

"Managing expectations is always a challenge for CEOs no matter what type of market we're in, but in a bear market, managing risks becomes a much greater concern," Evans pointed out. "Risks all become magnified, and boards and investors often become more conservative, making it even tougher for CEOs to take the risks they may need to in order to meet expectations."

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 2000 Deloitte & Touche Sixth Annual Technology Fast 500, a ranking of the fastest-growing technology companies in North America as determined by percentage revenue growth over five years (1995-1999).

The Deloitte & Touche Technology Fast 500 is an annual ranking of the fastest growing technology companies in North America. The deadline for nominations for the 2001 list is May 15, 2001. Nomination forms are available at www.fast500.com or by calling 800/982-8566. The 2001 Technology Fast 500 ranking will be announced in November 2001.

About Deloitte & Touche

Deloitte & Touche, one of the nation's leading professional services firms, provides assurance and advisory, tax, and management consulting services through nearly 30,000 people in more than 100 U.S. cities. The firm is dedicated to helping its clients and its people excel. Known as an employer of choice for innovative human resources programs, Deloitte & Touche has been recognized as one of the "100 Best Companies to Work For in America" by Fortune magazine for four consecutive years. Deloitte & Touche is the U.S. national practice of Deloitte Touche Tohmatsu. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity. For more information, visit Deloitte & Touche's Web site at www.us.deloitte.com.

About Deloitte & Touche's Technology & Communications Group

The Technology & Communications Group is composed of service professionals who have a wealth of experience serving technology and communications companies throughout the world in areas including Internet, software, semiconductors, cable, media and publishing, communication utilities, networking, computers and peripherals, and related industries. These specialists understand the challenges that technology and communications companies face throughout all stages of their business growth cycle and are committed to helping them succeed. Deloitte & Touche is a leader in providing strategic, financial, operational, and information technology assistance to its technology and communications clients.

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