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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Uncle Frank who wrote (44819)	7/27/2001 10:14:21 PM
From: stockman_scott	Read Replies (1) \| Respond to of 54805

Silicon Valley Economy Shrouded in Tech-Bust Gloom By Daniel F. DeLong NewsFactor Network July 27, 2001 On the heels of the dot-com implosion, business and economic conditions in California's beleaguered Silicon Valley are going from bad to worse. With the announcements on Thursday that venerable printer and computer firm Hewlett-Packard (NYSE: HWP) and fiber-optic components maker JDS Uniphase (Nasdaq: JDSU) would trim a combined 13,000 jobs, California's beleaguered Silicon Valley area is shrouded in deepening summer gloom. The number of technology pink slips handed out since the beginning of the year is approaching 200,000, according to various estimates, and the end is nowhere in sight. "I don't recall ever seeing such a harsh downturn here," Dr. James Forcier, managing director of Bay Analytics, a Silicon Valley consulting firm, told NewsFactor Network. Years To Recover Forcier said that some high-tech sectors are looking at years, rather than months, before they will fully recover from wounds suffered after the Internet bubble burst. From San Francisco's so-called Multimedia Gulch, which was home to many dot-com startups that burned through billions of dollars of venture capital, to the elite corporations of Silicon Valley, people are beginning to dread what the future holds. "Given today's overall weakness in the economy, there simply is no compelling reason for companies to spend on new software applications and other technology equipment," Lehman Brothers analyst Neil Herman told NewsFactor. Recent Strategies Fail Despite forced vacations, temporary closings and the jettisoning of excess office space, no single strategy so far appears capable of returning profits -- or confidence -- to the sector. Lehman Brothers' Herman said that inventory levels continue to remain high. Coupled with the slowdown in orders that has caused a glut of stock to pile up in warehouses, that translates into a continuation of the pain. Daniel Kunstler, a J.P. Morgan analyst, explained to NewsFactor that high-tech companies are engaged in a curious balancing act. "Cost cutting is at the top of everyone's agenda, but most of them don't want to cut back so much that they won't be ready when a recovery happens," he said. Slowdown Is Everywhere The slowdown is taking its toll throughout northern California, from the Wine Country region, where summer visits are estimated to be off by about 20 percent, to the posh hotels of San Francisco, where room rates have been slashed by up to 50 percent in many cases. Restaurants are reporting that sales are down significantly, and are cutting staff and, in some cases, closing for lunch. One Bright Note Perhaps the most notable changes are the sudden reappearance of parking spaces in San Francisco and shorter commute times on the usually overburdened freeways that snake through Silicon Valley. Caltrans, the state agency that oversees California's freeways, told NewsFactor that these days many morning commuters are getting to work in about half the time that it took just six months ago. "It is refreshing to be able to move around without the frenetic pace of the past couple of years," Gus Pangan, a health care executive, told NewsFactor. Real Estate Concerns Commercial real estate prices are reportedly tumbling, off by nearly a third in San Francisco, according to broker Cushman & Wakefield. And the vacancy rate is about 10 percent -- mid-1970s recession levels -- nearly 10 times higher than it was last summer. The hard times have not yet caught up with home prices, however. While prices dropped 2 percent in June from May, they were still up some 20 percent from year-ago figures, with a median price of US$535,000. Part of the reason might be that falling interest rates are encouraging potential purchasers to buy. "That might not be the case in the next few months," one broker told NewsFactor. "Inventory is building quickly, and buyers are staying away, waiting for prices to fall even more."