Survival Game: Tech Giants’ approach to recession in the last 2 decades

CFOs and financial experts everywhere are increasingly worried about the recession. Why? Unassailable companies today will see restructurings, bankruptcies and executive departures in a single downturn. Tech and corporate giants have discovered the need for innovation and thinking outside the box to stay afloat in times of recession.

The crime scene

Corporate execs world around and especially in the US are nervous with the decrease in treasury yields, drop in freight shipments and corporate gurus predicting the high probability of the US economy going into recession in 2020.

Despite the negativity, the below companies, by incorporating brutal yet necessary changes to beat the odds of a recession, have managed to stay afloat and see profits. Their rise led by innovators in the industry and of course, maybe a little help from a famous soccer star have proven that patience proves predictions wrong!

Take Amazon, for example, after the recession in 2009 they focused on long-term achievements with new products like Kindle 3.

Playing the big leagues

Since the last recession in 2009, the tech industry has had a good decade-long expansion. Stocks soar for Amazon more than 2,000%, Apple is up almost 900%, and the once-without-hope Microsoft is up more than 400%. Low-gain smaller companies have done well too, like Netflix with more than 5,000% and Salesforce up more than 1,400%.

Uber and Twitter grew through IPO, achieving all-around over USD 100 billion in new market value. Start-ups like these only prove that wisdom of the core investors and their executives are directed towards achieving power and dominance.

Survival of the truly fittest

Great Recession or the dot-com bust, look out for the below to understand surviving downturns curated from some of the industry’s best:

·      Weak balance sheets tend to run out of money when there is a reversed cash flow and when exterior financing isn’t available. This is precisely the scenario when companies doing so well suddenly vanish.

·      Mergers, buyouts, spinoffs and other restructuring techniques and engaging in business recombination creatively are what most owners look into when they want to keep their brands floating.

·      Performance reviews will filter executives to be fired; namely the ones who haven’t shown progress and employees with star records will be planning their exit before things get out of hand. These things can happen predictably after a problematic quarter or two.

·      Large companies generally avoid under performing, finicky or new businesses. But this is a good thing for start-ups since the big companies will choose to stay away from disruptive business models.

·      Companies largely dependent on ads for revenue struggle when they tighten their advertising budgets, especially when the cash is flowing towards ad giants like Google or Facebook may probably not make it to the other side. Social networks like Twitter, Pinterest or Snapchat, though small, could face challenges.

·      Shareholders facing loss and looking to blame someone spur board activism and lawsuits.

·      Employee activism, on the other hand, at big places like Google will eventually dry up which makes recruiting new engineers easier.

·      Inequality will visibly get worse. Billionaires will be enemies, particularly in technology.

·      Companies and investors who manage to survive will face lesser competition but more scepticism that allows them to prepare ahead for the next bang.

Intel's USD 2.89 billion profits recently prove that "What goes down eventually comes up." They sat tight during the recession, their client companies stalled computer purchases, and they are now seeing a 10-year high because of the pent-up demand and the profits still soaring.

Recessions come and go to test investors and to distinguish between strong and weak companies. Those who make it, have less competition and will see a massive upside!