Gottfried, Sometimes I think the most important task is just to find the companies that will survive. AMAT is at the top of my list. Below is an interesting article that draws parallels to another era.
John
cbs.marketwatch.com
The ghosts of Route 128
Commentary: Tech job cuts begin to look familiar
By David Callaway, CBS.MarketWatch.com
Last Update: 12:11 AM ET Sept. 6, 2001
SAN FRANCISCO (CBS.MW) - As a young business reporter in Boston during the
last technology recession in 1991 and 1992, I spent a lot of time hanging
around in parking lots.
Big, yawning, empty parking lots in suburbs like Lowell, Maynard and
Chelmsford, Massachusetts, home to now long-forgotten technology companies
like Wang Laboratories, Digital Equipment Corp., Apollo Computer and Prime
Computer.
It was the death of the Bay State's famed Route 128, home to some of the
most explosive technology growth of the 1970s and 1980s, and I was assigned
to chronicle it through the eyes of the folks who were driving out of those
parking lots for the last time.
Most folks had the same reaction: a shrug of the shoulders, a kind word for
the importance of the work they had done and the company they had built, and
a vacant stare into an uncertain future.
During those years, the technology companies of Route 128 and the
surrounding area laid off tens of thousands of people. Their stocks, once
the stars of Wall Street, fell into the single digits as earnings warning
followed earnings warning.
And one by one, they were bought out by competitors, each deal with a
promise that the combined strength of the new company would revive the
fortunes of a technology and business plan that had already changed beyond
recognition.
I thought about these companies as I edited stories this week about
Hewlett-Packard (HWP: news, chart, profile) buying Compaq Computer (CPQ:
news, chart, profile) for some $20 billion, and as the two companies pledged
to grow stronger by cutting costs - and thousands and thousands of more
jobs.
How many of those H-P employees who will lose their jobs in the next several
months were around when the company bought Apollo Computer a decade ago,
with all the promises about what that deal would achieve? How many Compaq
staff were there three years ago when it bought Digital, at one time the
world's second largest computer company?
As layoffs nationwide passed the one million mark in August, the parking
lots and freeways in Silicon Valley are starting to resemble those of Route
128 ten years ago. See full story on latest layoffs figures. Restaurants and
hotels around them, once teeming with conferences and job fairs, are now
empty, fighting for survival.
Just as Wang and Digital succumbed to the reality that their products were
outdated, inferior, or overpriced compared to those of their competitors,
Hewlett-Packard and Compaq face the challenge of merging their businesses
and products to face the reality of the dominance of companies such as Dell
Computer (DELL: news, chart, profile) and IBM (IBM: news, chart, profile) in
their markets.
The precipitous decline in technology stocks over the last 18 months has now
entered the shakeout phase, where we will see more consolidation among the
second, third and fourth companies in their markets, in order to challenge
the leaders.
Expect more deals, especially in hardware, software, and most of all,
telecom. More deals will lead to more layoffs short-term, which will hurt
the economy further as people hunker down for a long fall and winter without
work.
Eventually, though, the deals will become the catalysts for a renewed rally
in stocks, including technology stocks. The bottom will have come and gone
before most pundits can identify it.
But this time there will be new technology companies leading the charge. In
the Boston area, the companies that survived were not the big computer
makers. They were the biotech firms, like Biogen (BGEN: news, chart,
profile) and Genzyme (GENZ: news, chart, profile).
Tiny research labs at the time that Digital and Wang roamed the earth, the
biotech survivors emerged into mature companies at the forefront of their
new technology. They scooped up smaller companies and developed products
that changed their industries.
That will happen again. Biotech, hardware, software, networking, Internet:
all these industries will see consolidation and all will see new leaders
emerge, and attract investors.
It will take time, and likely considerable more pain. We are nowhere near as
in bad a shape as we were in the early 1990s, when unemployment was almost 8
percent, compared with less than 5 percent right now. I don't think we'll
get there.
The last recession coincided with a banking crisis and real estate sell-off,
neither of which appear on the horizon right now. But more layoffs, in
technology and financial services in particular, are definitely in the
cards.
Sometimes it seems, as the Nasdaq falls day after day after day, that this
will never end. But it always does.
And the stock market will sense the recovery and the next step in the
technology revolution long before the parking lots of the Silicon Valleys of
this world begin to fill again.
David Callaway is executive editor of CBS.MarketWatch.com. |
