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December 4, 2000

Executives See Trouble Spreading
By Andrew Ross Sorkin, New York Times

Tech Execs Admit The Worst Yet To Come ... Weiss comments

SCOTTSDALE, Ariz. - Michael Dell just came out and said it.

``There haven't been a lot of great reasons to buy a new computer,'' Mr. Dell, the chairman of the Dell Computer Corporation told a group of investors here this week.

Jeffrey Weitzen, president and chief executive of one of Dell's rivals, Gateway, put it another way, the day after his company shocked the market with news that sales and profits would fall far below forecasts.

``Do you really need a gigahertz processor?'' Mr. Weitzen said during an interview here. ``We're finding people don't need that. The drive for speed is no longer what it once was.''

Neither is the drive for online retailing, said Shelby Bonnie, chief executive of the technology news service, CNet Network. "People have way oversold the e-tailing space."

The doomsday declarations were uttered at the annual technology conference sponsored by the investment bank Credit Suisse First Boston, which seemed to be ground zero this week for the implosion of investor confidence in the information technology sector.

The conference's organizer, Elliott Rogers, managing director and head of the company's technology research group, said as much: "Suspicions of problems have been confirmed. It's like getting hit by a 2 by 4."

The conference, a weeklong open-microphone session for chief executives of technology companies, coincided with a particularly heavy pummeling of the technology-heavy Nasdaq composite index, which fell nearly 9% this week. And the 2,000 or so investors here seemed to divide their attention between the Nasdaq and the 200 technology chiefs who found themselves here not to praise their companies but mainly to explain themselves.

The message from many was consistent, if it sounds a bit desperate at times: The drop in their stock prices was simply part of a correction - an over-correction, they insisted, and not a reflection of the fundamentals of their businesses.

And yet, there was no getting around the evidence that the stock-market correction coincided with an actual slowdown in some key segments of the technology industry.

Each in their own way, the industry chiefs seemed to be asking the same questions: Is my rivals' problem going to become mine? Am I really in a cyclical business? Is the new economy subject to the same ebbs and flows as the old economy?

Mr. Rogers, the conference organizer, said technology investors of all stripes will simply have to accept certain economic realities.

``There is a shortfall in demand, if not a serious growth deceleration,'' he said. ``It's not just in computers. It's in everything. I've been through this many times before. It's called a cycle.''

Throughout the tech bubble of the late 90s, the mantra of technology companies was "business cycles don't apply to tech companies." Well, think again. Tech companies have gotten slammed by the economic slowdown that is strangling the U.S. economy, and, tech executives are admitting more woes to come.

Executives at leading technology companies cringe when they look at how much market cap has been lost in the past year - estimated at $4 trillion for just the Nasdaq alone. . Despite a slight boost on Friday, the Nasdaq remains 48% below its March high.

Meanwhile, investor enthusiasm for tech stocks is as dry as the Sahara. And from their comments at this conference, most tech executives are still trying to figure out why the old business cycle rules should apply to them instead of adjusting to the realities of the current economic environment.

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