React to the Current Economic Crisis: Implement a More Effective Value Creation Strategy

The recent down grade of the United States debt rating and the present significant sell-off in the stock market could serve as a warning to all technology companies that better financial performance will be necessary for a successful IPO or keeping their present market valuations.

The U.S. markets closed out their worst week in more than two years on Friday and the sell-off continued today amid:

1.    Frustration with poor economic growth;

2.    The down grade of the U.S. debt rating, and

3.     The inability of politicians to address pressing concerns over high public debt in both Europe and the United States.

Well known financial analysts suggest that the technology market valuations may be especially sensitive to the present economic environment. This is because many of these valuations are based on significant growth expectations.


Today, many investors may be questioning a number of high technology valuations. Many of these investors still remember the multibillion valuations and the difficult days after the dotcom boom of the late 90s and early 2000s  

Examples of the changing landscape in technology stock evaluations include:

1.    A growing number of companies who have delayed or pulled their IPO plans; and

2.    A large number of high-valued public technology companies are showing signs of investor confidence in the sector: Examples include:

o   Two recent technology IPOs, Pandora Media Inc. (P.N) and Renren Inc. (RENN.N) , sometimes called the "Facebook of China", are both trading below their IPO price;

o   LinkedIn shares recently fell about 10 percent after Morgan Stanley downgraded their ratings; and

o    Yandex NV (YNDX.O), while still up from its IPO price, has been very unstable.

o   GSV Capital Corp (GSVC.O), a publicly traded investment fund that owns stakes in venture capital-backed tech companies Facebook, Gilt Groupe and Chegg, saw their shares slumped almost 30 percent since hitting a record on July 18.

The bottom line is that there is a new reality for both mature and emerging technology companies: 

“A successful IPO or the ability to maintain a high market value will require being more effective and more profitable”. 

In this market environment, it is important that each technology company, large or emerging, should execute an effective Company Value Creation Strategy.

Some of the most successful companies in the world have created billions of dollars in additional value by implementing an effective Company Value Creation Strategy.

Based on where we see the most major benefits identified, we developed an approach for implementing a Company Value Creation Strategy based on a number of “lessons learned”.

This approach is based on the following six steps:

1. 1.    Evaluating all company strategies and plans to evaluate additional potential for driving additional company value;
2.   Creating customer responsive company culture with supporting program;
3.   Creating a more cost efficient organization through culture change and supporting programs;
4. Creating a vender value chain partnership targeted to improve company valuation with supporting programs; 
5. Identifying  the longer term structural issues affecting the company’s value creation and implementing an approach to solve them; and
6. Evaluate the implementation of a Three-tiered Management Reward System for company management targeted to increase corporate value.

If your company is interested in implementing an effective “Company Value Creation Strategy”, we would be happy to discuss how this approach may be applied to your company.

In addition, we look forward to your comments on the steps that you are taking to improve your company value.