CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

2HRS2GO: Blame the tech industry

    COMMENTARY--Don't criticize Alan Greenspan for the tech industry slowdown.

    Dump Your Troubles On The Economy has become an easy mantra of technology chiefs struggling to explain the recent decline in their companies' fortunes. They want the government--meaning Greenspan and President George W. Bush--to help out. Bring "growth engine" status back to tech companies. Juice their stock prices and make their executives paper billionaires again.

    "We do not determine overall macroeconomic policy," Sun Microsystems CFO Michael Lehman declared yesterday. "We do not set interest rates or determine consumer confidence."

    The implication: This is the Federal Reserve's problem to fix; technology vendors are just along for the ride.

    You certainly can't fault Sun (Nasdaq: SUNW) or other infrastructure companies for capital spending slowdowns. But don't point fingers at Greenspan.

    Some tech executives would like you to believe the Federal Reserve's monetary policy has been too tight. Proponents of that view say Greenspan either should not have raised interest rates as much as he did, or he should have been quicker to reduce them last year. Companies would have been able to borrow more money for equipment, and everybody would have been happy, wealthy and potent.

    It's a neat little package of blame. Too bad reality doesn't come wrapped with a bow.

    The tech industry's real problem is exemplified by this headline today: "Most people can live without wireless Web".

    That piece from Reuters notes that a recent survey concluded that most folks see no need for Internet access on portable devices. To no one's surprise, gadget-obsessed Japan was the exception.

    Wireless online access is only one example, but it applies to the rest of the technology and communications industry. At some point, people decided they didn't need everything the tech industry is trying to sell, at least not right now.

    Dot-com companies say they collapsed because the capital markets dried up, but any publicly traded company that can't quickly sustain itself on its own operations is probably a bad business model anyway. There is no advantage to buying toys or pet food online.

    Sales of PCs and wireless handsets didn't slow down simply because of higher interest rates. They slowed because current PCs and cell phones are more than adequate for almost any task. Not many people felt compelled to buy a G4 Cube from Apple (Nasdaq: AAPL), or a Pentium 4-powered box from Dell (Nasdaq: DELL). Nokia (NYSE: NOK), Motorola (NYSE: MOT) and Ericsson (Nasdaq: ERICY) discovered that almost everyone in Europe and the United States who wants a wireless phone already has one.

    Telecom companies didn't stock up on equipment in the first half of 2000 just because the prime lending rate moved up half a point. They bulked up on inventory because they didn't want to be burned by a parts shortage later in the year. Now there's a glut instead. In any case, network expansions ran wild in the mid- and late 1990s; at some point, companies had to take a breather.

    No, the problem is neither monetary policy nor burdensome taxes. The real failure here comes from the technology industry itself. Companies stopped producing compelling products and services, or failed to market them effectively.

    Microsoft (Nasdaq: MSFT) hasn't produced a "must-have" operating system in more than five years. Many online content companies couldn't provide sufficient advertising returns to justify the cost. Wireless communications still cost more and are less reliable than traditional fixed wire systems. The Baby Bells are content to roll...out...broadband...slowly. Large communications providers are still sorting through their own organizational messes.

    And many of those Internet-related business plans were just lousy. A shakeout had to happen, as it does after the birth of any new industry.

    All of those factors produced a domino effect that shuddered through the tech world. Greenspan, who has to rely on old data anyway, can mitigate or exacerbate cycles, but he didn't cause this one.

    Instead of complaining about the economy, the tech and communications industries should look in a mirror, preferably a finely tuned piece designed for routing optical communications traffic. The only flaws worth noting are in their own reflections. 22GO>