I don’t think the economy has turned; there’s still lots of other dark clouds out there: Mark McQueen
Experts say 2023 will be another tough year for tech companies large and small, though they said recent downsizing at bigger names might actually help smaller businesses in the sector recruit and grow.
Facebook parent company Meta Platforms Inc. is poised to see its biggest single-day gain in a decade on Thursday after beating earnings estimates, offering a possible sign of hope for the technology sector.
But Mark McQueen, president and executive managing director at CIBC Innovation Banking, said Meta’s surge should not be interpreted as a bellwether for the industry, with several major tech companies like Apple Inc. yet to report their latest earnings, and global economic uncertainty still lingering.
“I don’t think the economy has turned,” McQueen said in a television interview on Thursday.
“There’s still lots of dark clouds out there.”
Difficulties won’t be limited to just big-name companies like Meta and Google’s parent company Alphabet Inc., McQueen said. He predicted the next year will also present challenges for leaders at smaller Canadian tech companies who are dealing with the same pressures as big players, having to stretch their finances with smaller-than-anticipated revenues and try to grow with fewer workers.
“If you're a small-cap, mid-cap Canadian tech name who is slugging along, it's going to be a tough year,” he said.
McQueen expects fewer technology companies will go public this year and more will go private instead as the sector continues to recover from the challenges of 2022, after growth stalled in the sector amid economic headwinds.
Some experts attributed some of Meta’s Thursday rally to CEO Mark Zuckerberg’s pledge to run a leaner, more efficient company in 2023 after mass layoffs and a hiring freeze last year.
Mitch Green, managing director at private equity management firm Clairvest Group Inc., said big tech companies focusing on their core services is good news for smaller competitors, because it will mean less competition for talent, making it easier for smaller companies to hire people and meet wage expectations.
It also creates an opportunity for independent companies to sell products to larger ones, he added.
“We think our independent, mid-market technology services businesses will actually have a little more room to grow,” Green said in an interview on Thursday.
Layoffs from major companies could also lead to new businesses popping up as former workers start their own ventures, he said.
“Most of our companies that we work with were founded by people that had worked in bigger businesses and wanted to start their own thing,” he said. “It's awesome to watch that and I think we will see it again.”