Here we go, Chris!
Computers & Technology Do Gems Lurk In The Rubble Of Ailing Asia?
Investors Business Daily, Tuesday, April 07, 1998 at 12:03
Jim Matheson believes Asia's economic troubles mean opportunities
for adventurous technology companies.
In order to do that, tech firms must step back from their short-
term goals and look to long-term strategies, says Matheson, founder
and director of Strategic Decisions Group, a Menlo Park, Calif.-based
consultancy.
This approach is particularly vital when looking at such
rollicking regions as Asia.
"A crisis like this is both a threat and an opportunity," Matheson
said. "The smart company accepts the problems. Instead of saying,
'This is a hot stove, and I'm going to pull my hand back and run,'
they say, 'I'm just not going to touch that stove for now, and look
at what are smart investments.' "
Below, Matheson discusses with IBD how companies must change their
strategies to take advantage of opportunities in Asia. Matheson also
recently wrote a book - "The Smart Organization: Creating Value
Through Strategic R&D" - with his son David, who's a principal in
SDG's London office.
IBD:
How significant are Asia's troubles to today's technology firms?
Matheson:
For people who are very operationally focused, Asia is a problem.
They want to withdraw from Asia. Then there are companies that are
smart and have a prepared mind. They see this as the opportunity to
move. The smart companies may have to take their licks if they have
operations that depend on Asia or if they have customers that depend
on Asia. But the smart company will take the long view of how to
create value from what's going on in Asia.
IBD:
How can companies turn the crisis into opportunity?
Matheson:
You need to be prepared.
This example happened preceding the present crisis: One of the
biggest U.S. semiconductor manufacturers wanted to invest in a series
of fab plants in Asia to make DRAMs (dynamic random access memories).
We did a strategy study about whether they should invest in DRAMs
because . . . all of these companies were building fabs in Asia. We
built a supply-and-demand model on DRAMs. What it showed was there
would be a precipitous drop in DRAM prices. So (the chipmaker)
stayed out.
It shouldn't be a surprise to a smart company that there's a
hiccup in Asia. To a smart company, a hiccup is a time to move. For
example, this very company that didn't build the DRAM fab is now
buying Asianowned fabs because the owners are looking for money and
selling things off cheaply.
IBD:
Who are some of the bargain hunters?
Matheson:
I can't name names (of our clients), but there are some recent
happenings in the news. Hyundai (Electronics America) . . . now
needs cash and sold Symbios Inc. (for $775 million) to Adaptec Inc.,
its competitor. Other impacts (of Asia's economic troubles) are
companies that wanted to do (stock offerings), but can't anymore.
Instead, the alternative is to put the companies on the block and
maybe not get as much for them. This is the time for bargain
hunting. Even if companies have had to take some operational licks,
a big company still has the funds to go in and pick up the bargains.
IBD:
What would you tell companies that don't see the opportunity in
Asia yet?
Matheson:
First of all, the rules of the game have changed. Many
governments are willing to have more direct investment. And many of
the local players are willing to have U.S. partners. It's much
cheaper to get into a country by partnering now. You have to do some
thinking about when things will bounce back. You're going to have to
have some patience. If people don't want to take risks, they should
put their money in government bonds or put it in the mattress.
IBD:
Where's a good opportunity in Asia?
Matheson:
Asian semiconductor makers now don't have the money to buy
equipment. There will be a slump (in equipment sales). But you can
lease them equipment. Comdisco Inc. has been doing lease deals.
And, who knows, leasing might turn out to be profitable. It's a
little risky. Think back to the invention of the Xerox machine.
Xerox found that people were unwilling to buy their early machines,
so Xerox started leasing them. Then they found out later that they
were making more money on leasing the copier than on selling the
machines.
IBD:
What are some tips you can offer to the reluctant company?
Matheson:
A very important part of the behavior for some of these companies
is to take the time to think it through, which is not a Silicon
Valley attitude. You have to give time to strategy to do it well.
People don't want to think about the risks and uncertainties. They
just want to put a plan together. That may be fine for next
quarter's production. But for Asia in this crisis, it's going to
play over five years.
But at some point, Asia is going to become the biggest consumer of
PCs. We don't know if that's 2005 or 2010 or 2003. So you have to
think that through. What's the implication for your business? It's
not next month's production plan. So you have to take the time again
to think about different strategies. . . . So you win no matter what
happens. |
