Table: Lessons from the Past Apply Today
After examining 2,000 public U.S. tech companies in the last two downturns, BusinessWeek found there were common traits in the ones that became successes in the following years. Here are the tactics they used and a sampling of companies trying them out now.
HAVE CASH ON HAND
A firm foundation of cash is vital for investing in the business while others scrimp. Microsoft (MSFT ), which has $38 billion in cash, bought Great Plains Software last year, putting it into the fast-growing software market for small- and medium-size businesses.
BOOST TECHNOLOGY SPENDING
Don't be stingy with R&D dollars. The breakthroughs they pay for are a way to jump ahead of rivals. Veritas Software (VRTS ) upped its R&D spending by 36% in 2001 over the 2000 total. That helped add two points to its share of the storage-management software market.
BUILD OUT NOW
Invest in infrastructure to handle demand when the upturn begins. Taiwan's Elitegroup Computer Systems boosted its capital spending to $42 million in 2000 and 2001 to build motherboard factories in mainland China. That helped increase revenues 65% last year.
BUY ON THE CHEAP
Make acquisitions to inexpensively expand into new markets and fill in gaps in product offerings while valuations are low. Online auction giant eBay (EBAY ) has bought up auction sites in Germany, France, and South Korea--quickly becoming No. 1 in each market.
SPREAD THE WORD
Spend on marketing to gain brand awareness while rates are low and rivals are quiet. Leap Wireless (LWIN ), a local cell-phone operator, tripled marketing expenses in 2000, to $115 million. That boosted its customer base from 190,000 in 2000 to 1.4 million today.
LAYOFFS MUST COME EARLY
If layoffs are necessary, do them early in the recession so you aren't getting rid of workers just before demand picks up. Those that can afford it, hire. IBM's (IBM ) software unit expanded its sales force by 30%, to 10,000, over the past year--and has market-share gains to show for it.