Advertisment

Computer firms under pressure to perform

author-image
CIOL Bureau
Updated On
New Update

Andrea Orr

Advertisment

PALO ALTO: As the computer industry descends upon Las Vegas this week for its

annual Comdex trade show, it could find the mood less festive than in years past

when everyone from hard-core geeks to low-tech investors celebrated all the

latest innovations.

This year, investors are dismayed by the returns from high-tech stocks, and

many computer company insiders confess to being concerned about being able to

sustain the kind of dizzying growth the industry has enjoyed for so many years.

After several months of mounting concerns over a personal computer sales

slowdown and the failures of several Internet companies, the Comdex show kicks

off at a particularly rocky time for the industry.

Advertisment

Just last week, Dell Computer Corp., long an industry leader and a star of

the Comdex show, warned that its 2001 sales growth would slow to around 20 per

cent. This is well below the historical growth rates of 50 per cent that made

Dell a leading stock throughout much of the 1990s.

Other companies are under similar pressure. On Friday, the tech-heavy Nasdaq

stock index, which had soared last year largely on the good times in the

computer and Internet industries, dropped to within $2 of its low for the year.

"This year the tech economy and the dotcoms have put a real damper on

the industry," said Tim Bajarin, an analyst at the technologies firm,

Creative Strategies in San Jose, Calif. "Last year, everybody had dollar

signs in their eyes."

Advertisment

Few people are blaming the computer companies themselves for the slowdown.

The industry is continuing to innovate like crazy, and this year it is expected

to show off a lot of new portable and wireless devices that make it easier to

connect to the Internet anytime, anywhere.

The question is whether consumers will take to this latest generation of

gadgets the way they did to the plain old PC. The concern is that after years of

producing wildly popular machines that revolutionized the way people lived and

worked, the industry is increasingly turning out more marginal items that may

appeal to only a niche market.

Companies could be in the odd position of being victimized by their own

success if consumers are so happy with the speed and performance of their

current machines that they no longer see a need to upgrade.

Advertisment

"Sales growth numbers seem to bear out that upgrades contribute a lot to

revenues," explains Steve DelBianco of the Association for Competitive

Technology, a Washington, DC-based trade association for small and emerging

technologies. "But why upgrade if you are perfectly happy with your current

computer?"

Adds Rob Enderle, an analyst for Giga Information Group: "The PC market

has stalled rather badly. So right now, the industry is looking for anything

that will get people excited. We're not seeing the kind of revenues we've seen

in previous years and the industry is getting nervous."

At the same time, the industry is not abandoning its core product, the PC, as

the best hope for continued growth. For years, the thinking was that the PC

could become obsolete as consumers took to small palm devices and even wearable

computers. Now the PC is being regarded more as an essential platform that can

be accessorized with other devices.

Advertisment

So this year, much of the focus will be on more versatile computers that

serve as both portable and permanent devices. IBM is expected to show off a

"modular computer" - a compact device that contains the brains of an

entire computer so consumers can carry it with them and, depending on their

needs, connect it either to a laptop or a full-sized PC.

Similarly, Microsoft Corp. is expected to show off a tablet-like PC that is

even smaller than current laptops, yet functions more like a full-sized computer

than a palm device.

Attention will also be focused on Transmeta Corp., whose low-power computer

chips promise to keep laptop computer batteries running for hours longer,

significantly improving their performances.

Advertisment

And, there is a new wireless technology known as Bluetooth that is also

receiving a lot of buzz. The technology, which was originally developed by a

consortium of computer and software companies in 1998, synchronizes information

from disparate devices. like a cell phone and a PC, so they can connect without

cables.

Some of the first products based on the Bluetooth technology are expected to

be on display on the Comdex floor.

(C) Reuters Limited 2000.

tech-news