Tech Sector, Already Weak, Disrupted by Attacks
Filed at 8:11 p.m. ET
September 20, 2001
LOS ANGELES (Reuters) - Technology companies, already caught in a downward spiral by slumping demand, were knocked down even more by last week's attacks on New York and the Pentagon, analysts said.
``This is taking a bad situation and making it worse,'' said Lehman Brothers (news/quote) analyst Dan Niles.
With airline services disrupted and many companies restricting travel, computer chip makers can't ship products and software sales people can't arrange face-to-face meetings to clinch key deals. Replacing destroyed equipment will boost some telecommunications and computer makers, but that will be fleeting.
Overall, the attacks triggered fears that spending by both consumers and businesses would slow even further, given the possibilities of more trouble to come.
For the semiconductor sector, the attacks came as their stock prices were already skidding to new lows and now small hopes for a recovery have moved just out of reach.
The microchip industry will take a hit from the disruption in flight schedules following the attacks, said market research firm IC Insights. The firm now expects shipments to drop 34 percent this year, from an earlier estimate of 27 percent.
``The inability of many of the (chip makers) to ship products in mid-September -- that really pushed the third quarter down more than we expected,'' said Bill McClean, president of IC Insights.
Some chipmakers, such as Advanced Micro Devices (news/quote), said logistical disruptions would not hurt their financial results, but Niles pointed out that slower consumer spending might.
The shock waves from the attacks, such as more job cuts and lowered consumer spending -- may actually mean that stock prices will get knocked so low in the coming months a recovery in share prices could come sooner than expected, Niles said.
``There is going to be more near-term pain,'' he said. ``But if valuations get to reasonable levels sooner, then that could speed a recovery.''
DEMAND FOR SOME TELECOM HARDWARE
The attacks were a negative for long-distance voice communications, said Bob Konefal, managing director and head of the telecom group at Moody's (news/quote). But he added that telecom equipment vendors and information technology services vendors will get a boost.
``Last week's events will, perversely, provide what we believe to be a short-term benefit,'' he said, citing an increase in wireless use.
For telecommunications companies, the attacks meant a rush to restore service to the devastated areas of America's financial heart on Wall Street.
After scrambling over the weekend to restore service to the New York Stock Exchange and major financial companies, telephone companies such as Verizon Communications (news/quote) and AT&T Corp. are focusing on restoring service to tens of thousands of business and residential customers in the area.
That could take weeks, if not months to complete.
``The work is not done yet by any stretch of the imagination. You'll continue to hear about spot outages,'' said Frank Ianna, president of network services at AT&T, which had more than 3,000 employees dedicated to the disaster recovery.
SCRAMBLE TO GET BACK TO WORK
Some tech executives were stranded in cities far from home base, and ran to catch trains, buses or rent cars to get back.
Executives at Greensboro, North Carolina-based company RF Micro Devices Inc. (news/quote), a maker of radio frequency products used in mobile telephones, dropped everything to come home, spokesman Doug DeLieto said.
DeLieto added the company did see some disruptions in shipments at first as the company ships mostly by air. But that wouldn't affect the quarter's financial results, he added.
``It's absolutely been a much more sober environment,'' he said. ``It has not had an impact, however, on the business. It's had an emotional toll.''
RECOVERY STILL THE PRIORITY
Meanwhile, computer makers were busy filling orders streaming in from New York since the attacks on the World Trade Center on Sept. 11 that damaged the operations of hundreds of companies in the financial district.
Dell Computer Corp. (news/quote), the No. 1 personal computer maker, said it was making filling orders to New York and Washington a priority, but its overall business was not affected.
``The only difference around here is that customers who are affected in New York and D.C. whatever products they need to get their business back and going we're expediting those orders. Otherwise it's business as usual at Dell.''
The attack came at the worst possible time for the software companies, which typically close about 80 percent of their deals in the last few weeks of the quarter. The third quarter comes to a close at the end of September and sales people would have been out in force to clinch those crucial deals.
Airline delays and reluctance to travel will push the situation from bad to worse. Without face-to-face contact, many deals won't get done, analysts said. |
