Information technology sector coming out of prolonged slump

The local information technology market is afflicted by slow growth and financially unstable companies, according to the preliminary findings of a study contacted by the Foundation for Economic and Industrial Research (IOBE). The study, presented yesterday, shows that, on the contrary, the telecommunications sector is prospering. In 2002, Greek information technology enterprises saw their sales decline for the first time since 1997. Sales dropped 3 percent, while net earnings plunged 60 percent, following a 30 percent drop in 2001. One out of three IT companies are loss-makers. Besides profits, there is a decline in stock and equity capital. The increase in fixed capital reflects mainly the wave of mergers and acquisitions that took place in 1998-2002. The decline in stock reflects the efforts made by companies during a phase of declining demand to sell their existing products and services. Liquidity of IT firms remained at low levels, since about 30 percent of the companies sampled in the research do not possess permanent working capital. At the same time, increasing debt is leading to a decline in moves to expand businesses. A greater emphasis is placed on retrenchment into the main activities and an effort is being made to sell non-core businesses. Given these circumstances, the study forecasts a new round of merger activity in 2004-2005. Despite the difficulties, future demand prospects for both IT and telecoms products and services are rather good, the study finds. On a global level, the sector seems to be recovering from a three-year-long recession. In 2002, the IT and telecoms sector grew just 0.2 percent, while it is estimated that it grew 2.5 percent in 2003. Estimates for 2004 call for a 4.1 percent expansion. In Greece, the sector grew 1.4 percent in 2002, the second best rate in Europe; however, this was entirely due to the telecoms side. The study forecasts that, from now until 2006, IT services and equipment will recover strongly, while telecoms will continue to grow at the fastest pace in Europe and also among all Greek economy sectors. Small and medium-sized (SMEs) Greek enterprises are increasingly adopting the use of computers. Among SMEs, 35.6 percent used computers in 2002 and 19.6 percent have Internet connections. For 2003, computer usage is expected to have jumped to 41 percent and Internet connection to 23 percent. Among large corporations, usage is universal and 80 percent have their own websites. More than half of the big companies (53 percent) declare that they will increase their investment in IT and telecommunications. Among the population at large, about a quarter of people aged 15-65 use the Internet, while 32.8 percent use a computer. Three out of 10 households owned a computer in 2002 and 15.2 percent had an online connection. A further 10-12 percent declared they wanted to acquire a computer within the next year. An important factor affecting demand for IT and telecoms products and services is the Operational Program for an Information Society, partly funded by the European Union. There was great progress in the implementation of the program in 2003. It is now 83 percent complete. In 2004, projects worth 800 million euros will be implemented, mainly in electronic government, e-business and training, as well as in broadband infrastructure and services. The full results of the study will be available in mid-April.