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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (1992)	8/1/2002 1:53:40 PM
From: Proud_Infidel	Respond to of 25522

Technology Innovation: The Key to Recovery Thu Aug 1, 1:44 PM ET Lou Hirsh, www.NewsFactor.com Tough economic times have forced major tech firms to slash enterprise research and development spending, primarily because their larger customers are more focused on reducing costs than on exloring the latest cutting-edge innovation. "The general feeling in the industry is that there's not a lot of 'gotta-have-it' technology out there right now," Gartner ( NYSE: IT - news) research director Barbara Gomolski told NewsFactor. Experts say the innovation crunch is fueled by the current state of the economy, but that it also is a backlash created by the equipment spending-spree that many companies undertook in the mid- to late 1990s. Saturation Effect Gomolski noted that infrastructure players like Cisco ( Nasdaq: CSCO - news) and Lucent ( NYSE: LU - news) have been hit particularly hard by this "saturation effect." And other companies that overbought technology in the late 1990s are not convinced that more innovation is the solution to current market woes. "If you're a company CIO and you propose spending lots of money on some new whiz-bang technology, you're not going to be very popular," Gomolski said. Among the innovation casualties of this squeeze, according to Yankee Group vice president Zeus Kerravala, have been the development of Gigabit Ethernet for the desktop, advances in wireless local area networks, and work on higher-density storage devices for business use. Back to Basics Kerravala said that companies are more focused on streamlining basic operations than on technologies that do not promise an immediate competitive edge. "Company managers are saying, 'If it doesn't directly affect my business, I can put off buying that technology longer,'" Kerravala told NewsFactor. And Gomolski said another factor cutting into tech R&D spending -- and, in turn, discouraging innovation -- is that companies are demanding shorter implementation cycles for new products and services. For the moment, at least, companies are preoccupied with a back-to-basics approach, looking for ways to serve customers more effectively -- through improved Internet gateways, for example -- to enhance security, and to cut workforce costs using existing equipment. "People are not focused on sexy new technology," Gomolski said. "They are basically looking to make what they already have work better." Signs of Life Kerravala said a recent study by The Yankee Group showed that 63 percent of companies budgeted more money for information technology this year than last year, but that extra money is not going toward R&D. He added that at least 12 to 18 months will pass before R&D spending rises significantly at major tech companies. On the other hand, Gomolski predicted that technology orders could see an uptick by the end of 2002, but she said there likely will not be enough activity to stimulate much new R&D spending until the first quarter, or possibly the end of the second quarter, of 2003. This is not to say that innovation has completely dried up in the current atmosphere. Gomolski said that some of the most exciting innovations are happening in the area of biometrics -- such as fingerprint and facial scanning -- which promises to revolutionize security. However, she added, because these technologies are not used widely in enterprise settings, they are not likely to have an immediate effect on bellwether tech companies. Saving Grace Even if the short-term picture is not stellar, experts have predicted that innovation will be the tech sector's saving grace over the long term. In a March 2002 research brief, Forrester ( Nasdaq: FORR - news) analysts projected that corporate IT spending, spurred by pent-up demand, will help create 10.4 percent growth in the tech sector by the end of 2003. That growth is expected to be fueled by innovations like Web services -- based on standards like XML (extensible markup language) -- which Forrester believes will redefine the way people interact with companies. In addition, Forrester analyst Bruce Temkin noted that broadband will "reinvent consumer electronics," especially as Internet-connected devices like digital cameras and video recorders come into increased use. The Future Will Arrive Forrester also predicted that wireless sensors will enable everything to be interconnected, once less-expensive integrated circuits are incorporated into everyday devices. For example, these tiny chips will let users control "everything from fuel injectors to earthmovers" from any location via the Internet. Therefore, while current economic problems may have slowed the rate of innovation, the time-out is temporary. Sooner or later, a pent-up burst of creativity, fueled by a recovering economy, will burst forth. Then, as Intel ( Nasdaq: INTC - news) CEO Craig Barrett has predicted, the tech world will innovate itself out of its present doldrums.