Forrester sees upturn in 2010, eyes acquisitions

By S. John Tilak

BANGALORE (Reuters) - An expected improvement in technology spending will help Forrester Research Inc's (FORR.O) business bounce back in 2010, even as the company sees a hiccup in the second half of this year, a top executive said.

The technology market research firm plans to boost the revenue contribution from its high-margin core research segment and is also actively looking at acquisitions to drive growth, Chief Financial Officer Michael Doyle said in an interview with Reuters.

"2010 is going to be better. A recovery will be in place by then," Doyle said. "We believe next year...tech spending will be up. And Forrester will be up."

On Thursday, Forrester reported strong first-quarter results, helped by a 9 percent rise in its key research services business, but said the economic crisis would have a delayed impact on its revenue later in the year.

In the second half of this year, the company expects earnings to dip year-over-year and revenue to be flat or decline, said Doyle, who has held senior financial management positions at PepsiCo Inc (PEP.N) and EasyLink Services (ESIC.O).

"Our customers are cautious. We're seeing mixed signals."

The company has also taken a watchful approach, pulling back on expanding its sales force, a key to driving revenue for market research firms.

"We're going to hold our sales headcount flat until we see the economy picking up a bit," Doyle said.

Cambridge, Massachusetts-based Forrester, which went public in 1996, competes with Gartner Inc (IT.N) and privately held IDC. Gartner is due to report first-quarter results next week.

M&A AHEAD?

With valuations dropping due to the economic crisis, Forrester is looking at acquisitions to boost growth.

"We definitely have acquisitions on the forefront. We looked at an awful lot. There's a lot out there," Doyle said.

The company, which has made six acquisitions in its history, came close on a few potential acquisitions in the first quarter, but found them overpriced, Doyle said.

Last year, Forrester acquired smaller rival JupiterResearch LLC for $23 million. Doyle said the company would be willing to pay more than that for an acquisition.

"We have a lot of cash. So I'm not relying upon the financial markets to go do that." Doyle said. "We'll move very aggressively to make those things happen."