Changewave Research: 2Q/3Q 2009 Corporate Quarterly Survey

ChangeWave Research: 2Q/3Q 2009 Corporate Quarterly Survey

ChangeWave Research Report:

2Q/3Q2009 Corporate Quarterly Survey

U.S. EconomyStabilizes– Longer Term Outlook Showing Dramatic Improvement

Overview: ChangeWave’s latest corporate survey shows a stabilizing of theU. S. economy,with 2nd Quarter sales experiencing the biggest improvement in more than 4 years.

While the survey of 2,970 corporate respondents showscurrent U.S.sales are still contracting, there’s a dramatic lessening in the rate of decline. Coupled with broad improvements across a range of other keyindicators – including capital spending, the job market and the 3rd Quarter sales pipeline– the picturepoints towards an end of theU.S. recession beforethe close of 2009.

Note that as we saw during the recovery from the 2001 business downturn, coming out of a recession can be quite a bumpy ride. So while the results of our May 20-June 2 survey are highly encouraging, we’ll be keeping a close eye out for any signs of backsliding in the comingmonths.

U.S. Economy is Stabilizing

2nd Quarter 2009 Sales:While 44% of respondents still project that their company sales will come in Below Plan for 2nd Quarter 2009– that’s a big8-pt improvement over the previous quarter. Moreover, 13% say their company sales will come in Above Plan –a 4-pt improvement.

As the following chart shows, these 2nd Quartersales projections represent the biggest improvement in a ChangeWave survey in more than 4 years.

JobMarket:TheU.S. labor market is also showing signs of improvement.One-in-ten respondents (10%) report there are More new hires in their company at this point in the 2nd Quarter vs. last quarter – up 3-pts since the previous survey. Only 22% say there are Less new hires – down 8-pts from previously.

Dramatic Improvement in Longer Term Outlook

3rdQuarter 2009 Sales Pipeline: We asked respondents about their company sales pipeline projections for the 3rd Quarter, and found unmistakable signs of a dramatically improved outlook going forward.

A total of 18% say their company sales will come in Above Plan – which represents a 7-pt improvement overthe previous survey – the biggest uptick in 6 years. At the same time, just 28% report they’ll come in Below Plan – 10-pts better than the previous survey.

While the net 17-pt change is a huge improvement, the projections for the coming 3rd Quarter still show a sales contraction, so we’re not entirely out of the woods yet. But the results are another key indicator of a U.S. economic recovery by year’s end.

Capital Spending Stabilizing: In another bullish signal, going forward we’re picking up a dramatic deceleration in the rate of capital spending decline. So while one-in-four respondents (26%) still project a decrease in their company’s 3rd Quarter capital budget, that’s a major 15-pt improvement over our previous survey.

At the same time, 9% project an increase in their 3rd Quarter capital budgets – a 4-pt improvement and, most importantly, the first recorded uptick in a ChangeWave survey in 18 months.

Impact of the Credit Crunch:Forthe past 18 monthswe’ve been measuring the impact of the credit crisis on U.S. businesses – generally thought to be one of the key causesof the recession.

In our previous survey we reported the first signs of stabilization, but in our current survey we find actual measurable improvement – a sign that the U.S. government’s attempts to open the credit spigot are starting to pay off.

One-in-four respondents (25%) continue to say that it is harder for their company to borrow money than it was 90 days ago – but that’s a 5-pt improvement from the previous survey. And 3% now say it is easier to borrow money, 2-pts better than previously.

To be clear, the credit crisis remains a huge problem, but for the first time since we began asking this question in December 2007, the crunch is showing signs of abating.

Price of Products:Our current survey shows the slow economy continuing to hold down the prices companies are charging for their products, but for the first time in a year we’re seeing a slight lessening in the downward pressures.

A total of 7% report prices are now rising for their company's products – a2-pt increase from the eight year low recorded in our previous ChangeWave survey. The percentage reporting falling prices (25%) has declined by 1-pt – but remains at the second highest level of the past six years.

Individual Sector Results: For the second quarter in a row the Semiconductor sector is showing major signs of momentum – more so than any of the other sectors surveyed. Joining it this quarter in the leading sectors column is Natural Gas and Oil. Next week we will be providing you with a full report on the Leading and Lagging sectors in this survey.

Bottom Line: Our latest corporate survey has picked up clear signs of a stabilizingU. S. business economy.

Not only are 2nd Quarter sales stabilizing, but we’re picking up broad improvements going forward across a range of other keyindicators – including capital spending, the job market and the 3rd Quarter sales pipeline.

Further positive signs include the first easing of the U.S. business credit crunch that we’ve seen in 18 months.

Note that while the survey shows the U.S.economy is still contracting, there’s been a dramatic lessening in the rate of decline and the overall picture now points to an end of the U.S. recession beforethe close of 2009.

Summary of Key Findings

The ChangeWave Alliance is a group of 20,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary reports.

Helping You Profit From A Rapidly Changing World ™

Table of Contents

Summary of Key Findings...... 5

Key Findings...... 7

2Q 2009 Sales Results...... 7

Last 8 Years Comparison...... 7

Current Willingness of Customers to Buy Products...... 8

Hiring Trends in the 2nd Quarter...... 9

2Q 2009 Hiring Trends – A Comparison...... 9

Layoff Trends in the 2nd Quarter...... 10

2Q 2009 Layoff Trends – A Comparison...... 10

What’s in the Pipeline?...... 11

3Q 2009 Projected Sales Pipeline...... 11
Overall Sales Pipeline Projections – A Comparison...... 11

Capital Spending Growth Rate...... 12

Overall 2Q Capital Budgets – A Comparison...... 12

Impact of Credit Crunch...... 13

Ability of Companies to Borrow Money – A Comparison...... 13
Ability of Companies to Borrow By Company Size...... 13
Impact of Credit Crisis on Specific Business Components ...... 14

Survey Methodology...... 15

Additional Findings and Highlights...... 16

Price Pressures ...... 16

Price Pressures in the Current Marketplace...... 16
Ability of Companies to Purchase Commodities...... 16

2nd Quarter Cancelled Orders...... 17

Product Inventories for the 2nd Quarter...... 18

Backlog of Orders for the 2nd Quarter...... 19

ChangeWave Research Methodology...... 20

About ChangeWave Research...... 21

I. Key Findings

Overview: ChangeWave’s latest corporate survey shows a stabilizing of theU. S. economy,with 2nd Quarter sales experiencing the biggest improvement in more than 4 years.

While the survey of 2,970corporate respondents shows current U.S. sales are still contracting, there’s a dramatic lessening in the rate of decline. Coupled with broad improvements across a range of other key indicators – including capital spending, the job market and the 3rd Quarter sales pipeline – the picture points towards an end of the U.S. recession before the close of 2009.

U.S. Economyis Stabilizing:

2nd Quarter 2009 Sales:While 44% of respondents still project that their company sales will come in Below Plan for 2nd Quarter 2009– that’s a big 8-pt improvement over the previous quarter. Moreover, 13% say their company sales will come in Above Plan –a 4-pt improvement.

The Last 8Years:As the following chart shows, these 2nd Quarter sales projections represent the biggest improvement in a ChangeWave survey in more than 4 years.

Current Willingness of Customers to Buy Products

Customer Spending: We also asked respondents to rate the current willingness of their existing customers to spend money on their company’s products and services.

Nearly three-out-of-four (73%) say their customers still have either a Yellow Light to spend (i.e., spending is downsized, though not completely stopped) or a Red Light (i.e., spending is virtually on hold) – 3-pts improved from the previous quarter.

Another21% report that their existing customers have a Green Light to spend (i.e., spending is normal), but it’salso a3-pt improvement from previously.

Hiring Trends

We asked respondents about hiring trends in their company for the quarter.

Question Asked: We are two-thirds through 2nd Quarter 2009. How would you characterize the number of new hires (full or part-time payroll employees) in your company at this point in 2nd Q 2009 compared with the same point in the previous quarter (1Q 2009)?

Hiring Trends / Current Quarter 2Q 2009 / Previous
Quarter
1Q 2009 / Previous
Quarter
4Q 2008 / Previous
Quarter
3Q 2008 / Previous
Quarter
2Q 2008
More new hires at this point in
2Q 2009 compared to 1Q 2009 / 10% / 7% / 8% / 16% / 17%
Less new hires at this point in
2Q 2009 compared to 1Q 2009 / 22% / 30% / 31% / 22% / 20%
Equal amount of new hires in
2Q 2009 compared to 1Q 2009 / 15% / 13% / 16% / 23% / 25%
No new hires at this point in either 2Q 2009 or 1Q 2009 / 47% / 45% / 39% / 32% / 32%
Don’t Know / No Answer / 6% / 5% / 6% / 7% / 6%

Job Market:TheU.S. labor market is also showing signs of improvement.One-in-ten respondents (10%) report there are More new hires in their company at this point in the 2nd Quarter vs. last quarter – up 3-pts since the previous survey. Only 22% say there are Less new hires – down 8-pts from previously.

Layoff Trends

We also asked about layoff trends in their company for the quarter.

Question Asked: And, how would you characterize the number of layoffs of full or part-time payroll employees in your company at this point in 2Q 2009 compared with the same point in the previous quarter (1Q 2009)?

Layoff Trends / Current Quarter 2Q 2009 / PreviousQuarter
1Q 2009 / Previous
Quarter
4Q 2008 / Previous
Quarter
3Q 2008 / Previous
Quarter
2Q 2008
More layoffs at this point in
2Q 2009 compared to 1Q 2009 / 18% / 28% / 24% / 14% / 12%
Less layoffs at this point in
2Q 2009 compared to 1Q 2009 / 12% / 8% / 4% / 6% / 6%
Equal amount of layoffs in
2Q 2009 compared to 1Q 2009 / 15% / 13% / 11% / 12% / 13%
No layoffs at this point in either 2Q 2009 or 1Q 2009 / 49% / 46% / 55% / 60% / 63%
Don’t Know / No Answer / 6% / 6% / 6% / 8% / 6%

Only 18% now say there are More layoffs at this point in 2nd Quarter 2009 vs. 1st Quarter 2009, a 10-pt improvement from last quarter. At the same time, 12% say there are Less layoffs – a 4-pt jump over the previous quarter and triple the percentage of just 6 months ago.

What's in the Pipeline for 3rd Quarter 2009?

3rdQuarter 2009 Sales Pipeline: We asked respondents about their company sales pipeline projections for the 3rd Quarter, and found unmistakable signs of a dramatically improved outlook going forward.

Capital Spending Growth Rate

Capital Spending Stabilizing: In another bullish signal, going forward we’re picking up a dramatic deceleration in the rate of capital spending decline. So while one-in-four respondents (26%) still project a decrease in their company’s 3rd Quarter capital budget, that’s a major 15-pt improvement over our previous survey.

At the same time, 9% project an increase in their 3rd Quarter capital budgets – a 4-pt improvement and, most importantly, the first recorded uptick in a ChangeWave survey in 18 months.

Impact of Credit Crunch

Forthe past 18 monthswe’ve been measuring the impact of the credit crisis on U.S. businesses – generally thought to be one of the key causesof the recession.

Question Asked: Would you say it is now harder for your company to borrow money than it was 90 days ago, easier to borrow money, or has there been no change in your company's ability to borrow money?

Although the tight credit market continues to impact companies, we’reseeing across the board improvements – and it’s among companies of all sizes.

To be clear, the credit crisis remains a huge problem, but for the first time since we began asking this question in December 2007, the crunch is showing signs of abating.

Question Asked:To what degree – if at all – has the recent credit crisis affected the following business components at your company?

Current Survey (June 2009)

Greatly
Affected / Moderately
Affected / Slightly
Affected / Not
Affected / Don’t Know/Not
Applicable
Your Customers’ Ability to Purchase Goods and Services / 14% / 24% / 24% / 19% / 19%
Capital Investment / 14% / 19% / 17% / 27% / 23%
Purchases of Goods and Services / 9% / 19% / 21% / 33% / 18%
Investment in R&D / 9% / 14% / 15% / 31% / 31%
Your Company’s Supply Chain (i.e., the credit crisis’ affect on your suppliers) / 7% / 17% / 22% / 25% / 29%
Ability to Meet Payroll / 4% / 6% / 11% / 62% / 16%

Previous Survey (March 2009)

Greatly
Affected / Moderately
Affected / Slightly
Affected / Not
Affected / Don’t Know/Not
Applicable
Your Customers’ Ability to Purchase Goods and Services / 15% / 23% / 26% / 17% / 19%
Capital Investment / 17% / 19% / 17% / 23% / 24%
Purchases of Goods and Services / 10% / 21% / 22% / 29% / 18%
Investment in R&D / 11% / 15% / 16% / 27% / 31%
Your Company’s Supply Chain (i.e., the credit crisis’ affect on your suppliers) / 7% / 16% / 23% / 22% / 31%
Ability to Meet Payroll / 4% / 7% / 11% / 62% / 16%

Question Asked: Sales cycles tend to fluctuate over time. Focusing on sales cycles for your own company's products/services, would you say sales cycles are currently longer than they were 90 days ago, shorter, or have they remained the same compared to the previous 90 days?

Current Survey Jun ‘09 / Previous
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Sep ‘08
Significantly Longer / 9% / 10% / 8% / 4%
Somewhat Longer / 30% / 31% / 28% / 25%
Somewhat Shorter / 6% / 5% / 5% / 5%
Significantly Shorter / 1% / 1% / 1% / 0%
Remained the Same / 32% / 28% / 32% / 42%
Don’t Know / 22% / 25% / 26% / 23%

II. Survey Methodology

This report is based on a survey of members conducted online between May 20 – June 2, 2009. The goal of the survey was to get an up-to-the-minute picture of the health of the U.S. Economy and its sectors for 2nd Quarter 2009 and 3rd Quarter 2009. A total of 2,970accredited members of the ChangeWave Alliance participated in the survey.

III. Additional Findings and Highlights

The Price of Products

Price of Products:Our current survey shows the slow economy continuing to hold down the prices companies are charging for their products, but for the first time in a year we’re seeing a slight lessening in the downward pressures.

A total of 7% report prices are now rising for their company's products – a 2-pt increase from the eight year low recorded in our previous ChangeWave survey. The percentage reporting falling prices (25%) has declined by 1-pt – but remains at the second highest level of the past six years.

*Note that a total of 58% report their company’s prices are holding firm in the marketplace.

We note that the ability to purchase commoditiesappears to be improving, with 20% reporting it is easier for their company to purchase commodities than it was 90 days and10% saying it’s become harder – a net 9-pt change from previously.

Question Asked: How would you rate the availability of commodities? Would you say there is an excess supply, a sufficient supply or a short supply of the commodities your company uses?(n=1,533)

Current Survey Jun ‘09 / Previous
Survey
Mar ‘09 / Previous
Survey
Dec ‘08 / Previous
Survey
Sep ‘08
Excess Supply / 10% / 13% / 10% / 1%
Sufficient Supply / 60% / 57% / 59% / 56%
Short Supply / 6% / 5% / 6% / 16%
Don't Know / 24% / 25% / 26% / 26%

2nd Quarter Cancelled Orders

A total of 17% report their company is experiencing an increase in cancelled orders, but that’s 12-pts less than previously.

At the same time, 8% report their companies are experiencing a decrease in cancelled orders – a3-pt improvement from previously.

2nd Quarter Product Inventories

Inventories:We asked respondents to describe their product inventories for the current quarter.

The results show a decrease in inventories for the 2nd Quarter, with 19%reporting their inventories decreased, and only 9% saying they’ve increased.

Backlog of Orders for the 2nd Quarter

Order Backlog:We asked respondents if they have noticed any change in their backlog of orders for the current quarter. A total of 16% report an increase in their Order Backlog during the 2nd Quarter, up 5-pts from last survey. Three-in-ten (30%) report a decrease in Order Backlogs, 9-pts less than previously.

IV. ChangeWave Research Methodology

This report is based on a survey of ChangeWave Alliance members conducted online between May 23 – June 2, 2009. The goal of the survey was to get an up-to-date picture of the health of the U.S. Economy and its sectors, including any changes during the 2ndQuarter of 2009. Atotalof 2,970accreditedU.S. Alliance members participated in the survey.

ChangeWave's proprietary research and business intelligence gathering system is based upon the systematic gathering of valuable business and investment information directly over the Internet from accredited members.

The Research Network is assembled from senior technology and business executives in leading companies of select industries. Nearly 3 out of every 5 members (56%) have advanced degrees (e.g., Master's or Ph.D.) and 93% have at least a four-year bachelor's degree.

The business and investment intelligence provided by ChangeWave provides a real-time view of companies, technologies and business trends in key market sectors, along with an in-depth perspective of the macro economy – well in advance of other available sources.

V. About ChangeWave Research

ChangeWave Research, a subsidiary of InvestorPlace Media, LLC, identifies and quantifies "change" in industries and companies through surveying a network of thousands of business executives and professionals working in more than 20 industries.

The ChangeWave Research Network is a group of 20,000 highly qualified business, technology, and medical professionals – as well as early adopter consumers – who work in leading companies of select industries. They are credentialed professionals who spend their everyday lives on the frontline of technological change. ChangeWave surveys its Network members weekly on a range of business and consumer topics, and converts the information into a series of proprietary quantitative and qualitative reports.