Slowdown is all about a few scratches and bruises

How are things in Silicon Valley these days? Judging from more than six

months of mostly depressing financial news, massive lay-offs and financial

losses, one could easily get the impression that Silicon Valley is an economic

mess.

Not exactly!

Sure, house prices in the Valley have fallen about 10 per cent. But that is

from an average of $450,000. Believe me, no one who is trying to sell a house

purchased four years ago is complaining. They stand to make hundreds of

thousands of dollars on average.

"Unemployment in the Valley has sky-rocketed" the headline screamed

last week in the Valley’s premier daily newspaper. Sure, 3.2 per cent is

double the 1.6 per cent unemployment rate in mid 2000. And that number is likely

to increase in the months ahead. Many of the folks laid of at Cisco and others

have not been able to file for unemployment benefits because they are still

living off severance pay income. But skilled high-tech workers can easily find

new work in the Valley where hundreds of start-ups are constantly seeking to add

everything from engineers to bookkeepers as they prepare to enter the market

with their products and services.

With signs around that the drop in high-tech demand is bottoming out, it

appears the Valley will have made it through this downturn with but a few

bruises and scratches. Chances are it would take some time before solid

double-digit growth returns to such sectors as semiconductors, chip equipment

and networking gear. But overall things look good for a second half of the year

with some sales growth returning for companies that have been hit hard by the

current downturn.

Perhaps the best sign that the current downturn is a mere speed bump in the

continued success of the Valley and the rest of the global high-tech industry is

that there has been little or no slow down on the technology innovation front.

With Intel, IBM and others announcing new breakthrough chip production

capabilities, the addition of voice recognition to key products like Windows XP

and many other recent advances, the means to generate a new wave of high-tech

buying is in place. The temptation to purchase products based on leading-edge

technology has driven every recovery in Silicon Valley since Hewlett and Packard

started building electronic gear in their Palo Alto garage. Technology will

bring buyers back this time around as well.