opinion


Brexit came, Brexit went and it was all a bit dramatic

Europe At Golden Sunrise - View From Space

It’s all we talked about for weeks, at least in UK, and for the most part its now business as usual. The build-up to the referendum was highly publicized, and the result somewhat of a shock, but does it actually mean anything?

In each vertical there were numerous articles about the short, mid and long-term impact of the vote, and no-one was seemingly able to agree. This is completely understandable, as a nation with an economy the size of the UK, leaving a union such as the EU is unprecedented. But now the real work begins to ensure the decision does not impact the nation in a negative manner. As the industry is in the midst of quarterly season, Telecoms.com kept an eye out for Brexit references to understand what the real impact would be on the industry.

Firstly, from an employee perspective, it would appear spending will be decreased. A recent survey from Spiceworks, which was completed mainly by IT administrators and managers, claims spending in Europe will decline. While this has not been linked directly to Brexit, it comes at an appropriate time. The report claims spending in the US will increase to just under $328,000, up from $303,000, the average company budget in the EMEA markets will decrease to $241,000, though this only a marginal slide.

Despite slight pessimism from employees, this does not seem to be reflected from the upper management teams for the most part. Speaking on the company’s quarterly earnings call, IBM CEO Martin Schroeter doesn’t believe the referendum will have any material impact on the business over the remainder of the year.

“I don’t think that Brexit coming at the end of the quarter helped us at all, but we obviously finished kind of right where we expected to finish,” said Schroeter.

“What I typically observe in these kinds of instances is that our discussions with our clients have to go through a process of reprioritization, if you will. And remember, the extent of the discussions we have with our clients is about their most important processes.

“So as they reprioritize, the length of time that takes depends a lot on how much uncertainty they’re faced with. And obviously, the political leadership in Europe and the UK can help reduce that uncertainty, but we didn’t see – again, we don’t think it helped but it didn’t cause us to change our guidance.”

VMWare was another company where the Brexit sage was brought to the equation during the earnings call, though the team hedged itself slightly more. Here, the team focused on how the exchange rate would impact the business, and the potential outlook of the business throughout the rest of the year.

“As we looked at our second quarter results, we didn’t see an immediate impact, as you might expect, in the UK or Europe tied to Brexit,” said VMWare CFO Zane Rowe. “But as you would expect, we’re monitoring it closely. If you look at the currency side of things, it had a negligible impact on our second quarter results as well.

“Giving you a sense of size, our pound exposure is in the mid-single digits. So related to the UK, we don’t necessarily have significant exposure. If you were to look at our EMEA pipeline, it’s actually strong for the second half, and as I mentioned, while we’re studying it closely, we haven’t seen any impact just yet.”

One of the more prominent stories to venture out of the technology world in recent weeks was Softbank’s £24.3 billion acquisition of UK mobile chip designer ARM. The acquisition itself is largely believed to be a move from Softbank Masayoshi Son to position the company at the centre of the IoT revolution, which ARM could play a major role in.

Several times over the course of the press briefing Son was questioned as to whether the acquisition was a result of Brexit opportunism, effectively purchasing a UK business when the pound exchange rate favoured international buy-outs. Son repeatedly fended off the questions, highlighting this deal had been on the cards for some time, the company recently sold off positions in Alibaba and Supercell to raise around $18 billion to fund the deal, and would have come around regardless of the Brexit result.

In fact, Son also pointed out the share price of ARM had in fact risen in the period between the Brexit result and the acquisition. This increase in share price effectively removed any currency advantage which would have been achieved in light of a weakened pound.

Elsewhere, SAP CEO William McDermott also confirmed the Brexit result had little impact.

“First, we saw strength across all geographies including the BRIC. Despite widespread concerns, we experienced no effect from the Brexit vote,” said McDermott. “We saw a continued fast growth in cloud at 33%, tracking to the high end of guidance. Software license revenue grew fast at 10%, exceeding every expectation.”

F5 also agreed.

“Yes, in terms of the comments I made on the macro, it’s really straightforward, nothing in depth in terms of what I was coming to,” said John McAdam, F5 CEO. “You’ve got things like Brexit happening over in the UK, you’ve got all of the weird stuff that’s happening worldwide in places like Turkey.

“Frankly, although results seem to be going well this quarter, we are happy with ours, they’re still low percentage versus what the used to be five or six years ago. It’s really that. And I think just given that scenario we feel that we should be reasonably cautious, when we look at the forecast that we get from our sales organization and how we think the business is going.

“In terms of the linearity, it was pretty smooth, really, no surprises. We didn’t see any – it was really normal linearity, which for us, we like that a lot. And that was almost on a weekly basis, as well, right throughout the quarter.”

Brexit was a big thing for us in the UK. It was a vote of uncertainty, but certainly engaged the voters. Numerous commentators tried to put their own spin on what the outcome would be for the technology industry, but ultimately no-one knew as a move of this scale has not been witnessed before. The vote is too fresh in the memory to have any significant impact currently, though the long-term impact will be seen over the next 12-18 months, most notably once Article 50 has been activated.

All-in-all, Brexit happened and according to the business leaders mentioned above, that’s about it. It was all very dramatic for a few months, but for the moment, Keep Calm and Carry On.

Register for our upcoming Brexit webinar; ‘What’s Your Post-Brexit Strategy?’ taking place at 3pm on the 2nd August: http://telecoms.com/current-webinars/whats-your-post-brexit-strategy/

  • F5 Networks


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