Sun Predicts More Market Volatility
BY STEVEN FYFFE -- 11/5/01
Electronic News
Santa Clara, Calif.?Scott McNealy, Sun Microsystems Inc.'s chief executive officer, warned suppliers to expect more tough times ahead as the war on terrorism drags the entire global economy into uncharted territory.
"The message to all of our partners is: Get ready, you haven't seen volatility yet," McNealy said last week at Sun's annual Supplier Awards.
Twenty-two companies gathered for the awards dinner at Sun's Santa Clara, Calif., campus, which is built on the grounds of a former state hospital and mental institution.
Only a crazy man or a liar would claim to know when the market would recover, McNealy said.
"Have we seen the bottom yet? Nobody knows. I've never met an economist who had a clue. They are all making guesses. Nobody predicted any of this. People talk about a v-shape, a u-shape and an l-shape. All I've seen is a flat-line. We are not going to snap out of this immediately."
The Federal Reserve seems to have lost some control of the U.S. economy, McNealy said, and the Sept. 11 attacks and America's ongoing war on terrorism have made forecasting an even more difficult task.
"We had what I thought was the perfect storm before Sept. 11, and it hasn't gotten any better. Economies are going to bounce around like crazy. I call it the Bill Clinton lie detector test."
In a way, the anthrax scares at home and America's new emphasis on national defense could help pull the technology sector part of the way out of its current slump, McNealy said. "Would you rather get e-mail or regular mail today?" he asked.
Many technology companies will have a role to play as the U.S. government tries to find better ways to track people and purchases, McNealy said. He dismissed concerns that civil liberties would be trampled in the wartime rush to make intelligence gathering easier.
"I don't want to know if you buy four pounds of fertilizer, but I do want to know if you buy 4,000 pounds."
But even with the potential boost from increased defense spending, the technology sector still faces a tough road ahead. Palo Alto, Calif.-based Sun (nasdaq: SUNW) and its suppliers need to improve their lines of communication to the point where forecasting can take place on a daily basis and suppliers are flexible enough to respond to immediate orders or cancellations, he said.
"What we all need to be able to do is build businesses that can turn on a dime."
After all the doom and gloom, McNealy ended his speech on a positive note.
"This industry is only going to grow like crazy for the next 10 years. I can't tell you how it is going to do that for the next two years. I don't know what is going to happen short term, but I do know it is going to be a great place to be for the long term."
Boise, Idaho-based Micron Technology Inc. claimed Sun's Supplier of the Year award.
Micron's CEO Steve Appleton said he was pleased to receive the award and Sun's patronage at a time when the DRAM industry was hitting historic lows.
"Our industry has obviously been very difficult over the last 12 months," Appleton said.
As the PC market has slowed, networking has become a more important market for DRAM, Appleton said.
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