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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (34830)	10/20/2001 9:57:24 PM
From: Johnny Canuck	Respond to of 67962

"Nearly all of the post-1995 productivity jump can be explained by the performance of just six sectors: retail, wholesale, securities, telecom, semiconductors, and computer manufacturing," a summary of the study states. "The other 70% of the economy contributed a mix of small productivity gains and losses that offset each other." The study credits Wal-Mart's successful IT pioneering with forcing other retailers to change their ways and innovate their managerial processes as well as their technology. What's more, cyclical demand factors, such as how the stock boom triggered higher demand for luxury goods, were also key to explaining increased productivity with retailers, wholesalers and the financial securities industry. In fact, of the six sectors that McKinsey says drove productivity, only one benefited from the Internet: retail securities. By the end of 1999, nearly 40% of retail securities trades were performed online. This proved a huge boon to discount brokers like Charles Schwab and forced traditional retail brokers to deconstruct their business models. But overall, the implementation of new technology was not the engine of productivity that everyone seemed to think it was, the study says. Despite bulking up on personal computers and software, retail banks actually saw their productivity rate decline during the late 1990s. Granted, the convenience of online banking was not reflected in government productivity figures, but its impact was "probably modest," the study's authors surmise. In the end, retail banking's slower productivity would not have been reversed. "Banking was an example of an industry that spent on technology simply because it could," Manyika related to Barron's. "It will now spend less." While there was little evidence that IT was the primary catalyst behind the productivity boom, a ton of gear and software was sold during the late 'Nineties. According to McKinsey, a total of $1.24 trillion was spent on IT between 1995 and 1999, coming close to $3,000 per employee in the U.S. In all, each employee now has about $8,000 worth of technology at his or her disposal. . . . But the perfect storm has left a lot of wreckage in its wake. By the end of the second quarter of 2001, IT investment per employee had dropped nearly 10% from the previous year. "The IT industry is sailing into uncharted waters," the study states. "The trajectory of future IT investment is highly uncertain and depends on many key factors: how quickly economic confidence is restored, how quickly the businesses work through the overspending of the past five years, and how quickly compelling new applications and offerings emerge on the market that spur business spending ... Growth rates ranging from 5% to 17% are plausible ... But the IT investment boom [that] resulted from a confluence of unusual factors is unlikely to be repeated." The study estimates that American companies have spent about $350 billion more on infrastructure than they may need at this point in time. And while some of that additional investment will prove worthy, most of it is still excess inventory that may take anywhere from six months to two years to burn off. Says consultant Manyika: "The industry is going to have to work through that spending." interactive.wsj.com