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The Boston Globe

Business

Europe’s financial crisis hits firms in Mass.

Overseas sales slow in drug, tech sectors

Andres Kudacki/Associated Press

Spain’s economy minister met with reporters after Spain sought a European rescue of its banks. Spain became the fourth nation in the eurozone to ask for outside help in the past two years.

Massachusetts companies that depend on Europe for much of their business are reporting slowing overseas sales as the debt crisis there deepens, raising concerns that it may hamper the state’s economic recovery.

In the first four months of the year, overseas shipments of Massachusetts-made pharmaceutical products to Europe fell about 16 percent, and industrial machinery, including computers, dropped about 10 percent from the same period in 2011, according to the nonprofit World Institute for Strategic Economic Research in Leverett.

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“When they [Europeans] can’t buy our products, we’ll feel it,’’ said Michael Goodman, public policy professor at the University of Massachusetts Dartmouth. “We are more reliant on those markets than the nation as a whole.’’

Of the 50 states, Massachusetts is the eighth-biggest exporter to Europe, according to the institute; about 40 percent of the state’s $27.7 billion in 2011 exports were sent there. More than two dozen Massachusetts-based public companies get at least a third of their revenue from overseas, mostly from Europe, according to the financial reporting firm Standard & Poor’s.

At Progress Software Corp. in Bedford, which has 14 European offices and gets 40 percent of its revenue from overseas, sales are declining in Spain and other countries most affected by the debt crisis, said Dan Veitkus, general manager of overseas operations.

“What we see right now is that sales processes take longer, especially in southern Europe,’’ he said. “My expectation is that will last through the summer.’’

Avid Technology Inc., the Burlington company that makes editing products used for many Hollywood productions, has been warning investors about lower European sales since July. Avid’s overseas revenue in its region that includes Europe fell to $55 million for the first quarter of 2012, down from $65 million for the same period last year.

‘When they [Europeans] can’t buy our products, we’ll feel it.’

Michael Goodman University of Massachusetts Dartmouth
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“The issue in the eurozone is the lack of stability,’’ said chief executive Gary Greenfield. The uncertain outlook discourages European consumers from spending and businesses from expanding, hiring, and investing in new equipment - such as Avid’s video and audio editing software.

Beginning in late 2009, mounting government debt in Greece and other nations triggered the financial crisis, which has threatened the stability of the eurozone, the union of 17 nations that share the euro as their legal tender. Markets around the world, including in the United States, suffered losses in recent weeks partly over concern the crisis would force some nations to leave the union.

On Saturday, Spain agreed to accept a European rescue package to restore credibility to its ailing banks.

State officials are watching closely, said Ken Brown, executive director of the Massachusetts Office of International Trade and Investment.

“Just like every other state in the country, we are paying attention to what’s going on in Europe,’’ he said.

Governor Deval Patrick recently met with representatives of Portugal, France, and Ireland to discuss the debt crisis, Brown said.

Exports are important to the state’s growth because they bring new money into the economy that is used to expand plants, hire workers, and purchase goods and services. When exports decline, so does this infusion of revenue.

Exports may also decline when the dollar strengthens against the euro, which it has recently, making US goods more expensive for Europeans, who may instead buy domestically produced alternatives.

Many US companies don’t have a lot of direct exposure to Europe’s problems, however, said Nariman Behravesh, chief economist at IHS Global Insight, a Lexington forecasting firm. But seven eurozone countries and the United Kingdom have fallen back into recession, he said, and the concern is that should the debt crisis worsen, it could trigger a second recession in the United States.

Joseph Tucci, chief executive of the data storage colossus EMC Corp., of Hopkinton, has warned investors that European spending on information technology is likely to flatten or drop slightly.

“Everybody is looking over their shoulder,’’ he said in April. “Clearly, everybody’s worried about everything.’’ EMC did not return calls for further comment.

Many of the Massachusetts companies with strong ties to Europe are in the technology and life sciences industries. Parexel International Corp., a Waltham company that does contract research for pharmaceutical and biotech companies, has 4,500 employees in Europe and earned more than half of its $1.2 billion in 2011 revenue there, said Josef von Rickenbach, the chief executive.

Even though the company has seen lower demand from small and medium-size European customers, Parexel has no plans to withdraw from countries in Europe or change operations, he said.

“You can’t ignore Europe as a market,’’ Rickenbach said. “The growth may not be as high, but in terms of buying power Europe is right behind the US.’’

Michael B. Farrell can be reached at michael.farrell@globe.com.
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