High-tech companies may beat slowdown

The question that seems to pop up nowadays in the Silicon Valley is not

whether the high-tech sector is in a recession, but on how worse things will

get? The fears are also not unwarranted with signs of the high-tech industry

crumbling under the weight of the dotcom meltdown pouring in from every

corporate public relations office.

From Intel to Cisco, every news release seems to have bad news written all

over them. The present downtrend has hit Intel the hardest with the company

reportedly reversing a last month's decision to increase its capital spending

from between $6.9 billion and $7.5 billion to a modest $5.5 billion.

This would mean that the firm would be seeing fewer microprocessors leave its

chip fabs in 2001 and 2002 than previous estimates. Intel has enough capital to

build one more fab. It learned the hard way in 1999 and 2000 what happens when

you build one fab too few. So a severe cut back by Intel this time would mean

chip demand would probably hit the dismal level some time later this year.

There are plenty of scenarios for the current recession to be over just as

quickly as it popped up. With interest rates continuing to be lowered and

President George Bush on the way to effecting a massive income tax cut,

consumers may soon be spending the economy out of the recession.

But others seem to think that it may take a little longer. Clearly, the

strong 1999-2000 economy got consumers and business to spend lavishly. Now many

are keeping the lid on their expenses. Many Americans are still shell-shocked

from seeing their state turn the electricity off on them.

Consumers and business establishments alike are bracing for huge energy

bills, especially this summer when air conditioners will be running full blast

in millions of homes. Still, while things have taken a downturn, high-tech

companies remain in good shape to weather the next six to nine months.

The other outcome of the meltdown will be that excess employees, who were

hired when business was booming in Silicon Valley, may soon find themselves out

on the streets. But this comes as good news for the hundreds of start-ups

reading the next generation of technology products and services. Hiring a

qualified employee has been a Herculean task for them in the past three years.

But in the present scenario, the old adage 'One company's trash is another

company's treasure' might certainly prove true for Silicon Valley's

soon-to-be-laid-off workers.