Sybase sees tech spending staying tepid

NEW YORK Mon May 18, 2009 11:31am EDT

John Chen of Sybase Inc speaks during the Reuters Global Technology, Media and Telecom Summit at the Thomson Reuters headquarters in New York City May 19, 2008. REUTERS/Joshua Lott

John Chen of Sybase Inc speaks during the Reuters Global Technology, Media and Telecom Summit at the Thomson Reuters headquarters in New York City May 19, 2008.

Credit: Reuters/Joshua Lott

NEW YORK (Reuters) - Sybase Inc SY.N foresees technology sector spending remaining tepid for at least a year and possibly until 2011, although it expects growth in its burgeoning mobile division to begin ratcheting up, Chief Executive Officer John Chen said on Monday.

Chen said he expects annual revenue from Sybase's faster-growing mobility services business to match its database division at $1 billion in four to five years.

But he told the Reuters Global Technology Summit in New York that he remains cautious about the overall outlook for the economy despite mounting talk of a "green shoots" rebound and predictions that the IT sector had found a bottom.

Chen also said he is not counting on a year-end business technology spending boost this year.

"Cost-cutting -- I think we're at the tail end of it," Chen said. But he added: "Nobody should run their business expecting the party is starting again."

Sybase is seeing strongest growth in mobile.

He said Sybase's mobile division -- expected to generate about $400 million revenue this year-- would grow at a compound annual rate of up to 20 percent in the years ahead. That would outpace single-digit percentage growth at its core $700 million database arm.

After a 10 percent growth rate in the first half of 2009, Chen said he sees mobile revenue growth accelerating to as high as 20 percent in the second half of the year, boosted by new business in areas such as text messaging and mobile payments.

"In the second half we expect to see growth in the mobile business of somewhere between 15 to 20 percent," said Chen.

WHITHER ACQUISITIONS?

Roughly $200 million of Sybase mobile revenue will come from messaging and because much of this business comes from overseas markets, the executive said that his guidance assumes an adverse impact from currency fluctuations.

If this doesn't happen, "it's probably safe to say we'll have an upside" from messaging revenue, he said.

Chen said that the company's acquisition strategy would be focused on start-up companies in areas such as collaboration software to support online social networks and technology used for mobile money transfers.

"Those are things we could invest more in," Chen said.

Sybase technology currently supports mobile bill payments but Chen is looking to add money transfers, which he sees as a budding market in some parts of the world.

"Europe seems to be the most receptive. Africa will of course be receptive ... The U.S. is going to be slow," he said.

Asked about the prospects for Sybase being acquired by another software maker, Chen said he would only consider offers that would create significant value for shareholders.

For example, he said he would not consider a sale of the company for $38 a share but would be obliged to take a $50 per share offer to the company's board.

Sybase's shares were down 47 cents at $32.34 on the New York Stock Exchange on Monday, up from $24.77 around year-end, but still well below their 2008 high of $36.47.

(Reporting by David Lawsky, Anupreeta Das, Sinead Carew and Alexei Oreskovic; Editing by Edwin Chan and Gerald E. McCormick)

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