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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (13456)	12/16/1997 9:25:00 AM
From: akidron	Respond to of 70976

Don't Blame Asia: The Trouble's at Home by Randolph Court 5:06am 15.Dec.97.PST Asia may be a convenient scapegoat for less-than-stellar performance, but the US tech industry is actually facing its biggest problems at home. Executives at Oracle and other companies started crying wolf only weeks after financial markets slid out from under most of Asia, but the real problems lie in over-supplied domestic markets. The fallout from Asia will be felt sure enough - but that'll be in the months to come. "At the highest level, the Asian situation has given companies like Oracle an excuse," said Forrester analyst Don DePalma. "They can say deals didn't happen and contracts were pushed off, but that's less reality than scapegoating." Others who have claimed to have fallen ill with the Asian flu recently include System Software Associates, disk drive-maker Quantum, and semiconductor assembly equipment maker Kulicke & Soffa Industries. It seems there is a huge gap between the expectations created by the early success of the Internet and what mainstream firms can really do, or so says a recent Forrester report. Making matters worse, that chasm is being widened by the multitudes of suppliers hawking three or four new product releases every year - users can't keep pace with integration requirements. And that's not Asia's fault. "Our report concluded there is a hiccup in demand anyway," DePalma said. "Every segment has far more vendors in it than the market can reasonably expect to support." But now that the turmoil in Asia is really building, it seems safe to say there will be fallout here. "Obviously, currency problems hurt Asian companies' ability to spend and that will hurt [US] equipment companies," said Hambrecht & Quist semiconductor industry analyst Rod Chaplinsky. Moreover, "Asian manufacturers will be looking to dump products, which will hurt domestic manufacturers." Companies like Sun and IBM were beginning to show weak server sales last quarter. "And we're hearing rumblings of continuing weak server sales in the fourth quarter as well," DePalma said. Watch for Sun to be at the top of that list, but Hewlett-Packard and Silicon Graphics could suffer too. "But blame that on Redmond, not Rangoon or Bangkok," DePalma said. "Companies are turning to lower cost solutions like Windows NT." Attributing third-quarter problems to weakness in Asian markets isn't a valid excuse, because the major problems stemming from the Honk Kong market collapse just happened two months ago. Unless companies in the region were already feeling a severe pinch, they wouldn't have been pulling the plug on big deals yet. But in the wake of the Hong Kong and Korean debacles, if banks and large holding companies fail on a large scale, more deals will sour. "The net effect will be increasing weakness in demand for US high-tech items," DePalma said. "Looking forward in the Asian markets in the next six to 12 months, planners in US high-tech companies should revise their projections radically downward. The effects would be spread evenly across the board, hitting both software and the machines they run on." Software giant Microsoft, for one, isn't sounding panicky, though. Bill Gates said Thursday that he saw negligible growth in Japan's PC market this year but that the slump would not change Microsoft's strategy in one of its fastest-growing markets. "Due to a number of factors, this year PCs won't grow much at all in Japan," Gates told a news conference in Beijing last week. "That doesn't change anything Microsoft is doing, so I wouldn't use the word 'concern.' What we're doing is not based on the number of the PCs that we sell in some countries - it's based on a long-term vision." Cisco, too, shrugged off questions about the Asian factor. The company refused to comment, pointing instead to recent quarterly reports showing that only 12 percent of its revenues are generated in Asia. To the extent that any company generates revenues from Asian markets, it is vulnerable to currency fluctuations, said Greg Vogel, a software analyst with Montgomery Securities. "Oracle, Microsoft, to a lesser extent Netscape ... everybody sells there." Acknowledging as much, Oracle president Ray Lane last week told the Paris newspaper Le Figaro that the Asian crisis would continue to hurt his company's fortunes for the next six months, but that Oracle's fundamentals remain strong.