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To: Night Writer who wrote (410)	5/15/2002 11:44:08 AM
From: Night Writer	Read Replies (1) \| Respond to of 4345

Chastened tech investors seek to ride out storm By Lucas van Grinsven BARCELONA, May 15 (Reuters) - Investors who made it to CSFB's annual European technology conference were welcomed by the Doors' "Riders On The Storm," an appropriate tune to accompany the downbeat message from many tech executives here. After a series of exuberant conferences, with bodypainted artists entertaining webbies and techheads at the giddy heights of the Internet bubble, long-time visitors said this year's conference drew a thin and specialist investor crowd. "There are a lot fewer people than last year. It's mainly the technology fund managers that have come, not the generalists. That probably means the generalists have given up on tech," one London-based technology fund manager said. That should be no surprise after the message they received last year, when executives told fund managers they still believed their business would pick up in the second half. It did not. A full year later any recovery is still wishful thinking for most companies. As a result, the Dow Jones European technology index <.SX8P> has fallen from 600 points in May 2001 to around 320 points now, having peaked at 1,230 in early 2000. There are some shafts of light to pierce the gloom, with chip equipment maker Applied Materials <AMAT.O> reporting in the United States on Tuesday signs of renewed demand for consumer electronics helping its business. However, at the same time Hewlett Packard <HPQ.N> chief Carly Fiorina said she was not counting on a meaningful improvement in IT spending until 2003. Few executives here in the Catalan capital are banking on a recovery materialising in the second half of this year. Now, most executives talked about cost cutting and did not look beyond the quarter. French computer services group Atos Origin <SEGN.PA> said its order book was growing every month, but added customers were still very prudent. "The question remains: 'will there be a recovery in the second half of 2002?', board member Dominic Illien said, adding that further cost cuts were on their way. French telecom equipment maker Alcatel's <CGEP.PA> CEO Serge Tchuruk said he saw no tangible signs of a recovery, and Dutch electronics group Philips' <PHG.AS> Finance Director Jan Hommen said consumers in Europe were still hesitant and the U.S. recovery post September 11 had slowed down. BELTS TIGHTENED Even if executives secretly believed an upturn would happen in the second half, few wanted to stick their neck out and repeat last year's mistake of giving false hope to investors. Who would believe them anyway. "This is not the starting point of the recovery," said fund manager Stefan Schmidt at Denmark-based Nordea Investment Management. Instead companies had tightened their belts and boasted how stringent cost control will take them through the downturn. "Companies have their costs under control," said CSFB's head of European technology research David Clayton, adding that the timing of an economic recovery mattered less to them than last year because many could now ride out the storm. Selected companies and sectors, like Germany's chip maker Infineon <IFXGn.DE> and Swiss PC and games consoles peripherals producer Logitech <LOGZn.S>, did not share in the gloomy mood. Their hopes of outperformance were mostly due to specific factors such as tight supply of memory chips, or resilient consumer spending in computer add-ons. But demand from corporate customers for technology and IT services remains stagnant, and telecoms infrastructure vendors see their industry contracting further every month as operators scrutinise the spending of every last cent. "In particular in telecom equipment there are very few signs that things are improving," said Andy Kastner at Zurich-based Credit Suisse Asset Management. BUYING OPPORTUNITY? Most technology investors believe that this is probably a good opportunity to buy at lower valuations, if only they knew when the recovery would kick in. "Technology companies that create equity value will eventually recover. It may take a few years but it's long-term a sound investment. The thing is, I'm being appraised on my investment returns over three to six months. I can't take that long-term view," one Stockholm-based fund manager said. Technology executives agreed that there were a lot of things wrong that could turn right in the not very distant future. Alcatel's Tchuruk said end-users demanded more services than telecoms operators would offer them. Operators would have to invest again if they want to grow their businesses, he said. Siemens Mobile Chief Operating Officer Lothar Pauly pinned his hopes on higher than expected spending on third generation wireless voice and data networks, because he believes that even small cities of 50,000 people will need to be covered to relieve the current, second generation of mobile voice networks. But to many investors these messages carried a ring of desperation, and like the companies themselves they tightened their own belts and wait for a real recovery. In a sign of the times, many fund managers opted to stay in a budget hotel downtown, rather than the plush sea-side venue where CSFB was hosting the event. ((European Equities Desk, +44 20 7542 8825, lucas.grinsven@reuters.com)) MORE * end of story *