EY - View from the top: Q1 2013

View from the top: Q1 2013

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The top 100 global technology companies were caught in a series of “innovator’s dilemmas” in Q113, brought on by the rise of five transformational megatrends according to EY’s latest View from the top: Global technology trends and performance, January 2013-May 2013 earnings season report. In contrast, the top 25 fastest-growing public technology companies posted significant gains driven by faster technology adoption during this same period.

There is stagnation in overall growth despite significant innovation in the megatrends: mobile-social-cloud-big data analytics and accelerated adaptation (technology companies rapidly adapting to the needs of specific industries, while other industries rapidly adapt to the evolving possibilities that technology enables).

Each innovation disrupts product lines, business models or both in one or more of technology’s segments: computers, peripherals and electronics, communications equipment, internet, IT services, semiconductors and software. So while some companies must catch up with leaders’ innovations, all are faced with the innovator’s dilemma of deciding when, how and how fast to transition to innovative new products and services from highly profitable but increasingly outdated ones.

"What we're seeing in the slow-down of aggregate growth for top global technology companies is the result of disruptive innovations. For many technology segments, revenue from traditional products is falling faster than mobile-social-cloud and big data analytics are growing. As companies successfully reinvent their products and business models, this will reverse and growth should return."

Pat Hyek, Global Technology Industry Leader, EY

Quarterly highlights

  • Growth stagnates: aggregate sales for the top 100 global technology companies in the first quarter declines 2% year-over-year (YOY) to $622 billion.
  • At $77 billion in aggregate operating income, YOY growth slows to 1% in Q113.
  • Innovation in “mobile-social-cloud” and big data analytics drives growth but also disrupts traditional product lines enough to cause the stagnation, as technology companies struggle to adapt in the context of global economic malaise.
  • Aggregate capex and R&D spending declined YOY in Q113, 12% and 7%, respectively. Both remain lower than two years ago, in Q111.   
  • Aggregate cash and investments, nonetheless, continue to grow beyond $1 trillion.
  • Disclosed value of the top 100 global technology companies' M&A transactions falls to its lowest level in three years in Q113: $3.3 billion, down 65% YOY.