February 2002  

The Economic Odyssey

By Stephen Lawton

Welcome to 2002. Let's hope this year will be better than the one just past, where corporate obituaries far outdistanced the number of stories about IPOs and launches.

If you listen to the pundits, the United States should be starting a recovery some time in the spring. I'll believe it when I see it. Right now, I still see too many companies announcing lower-than-expected earnings - or even trumpeting lower-than-expected losses - and unemployment continues to rise.

As I write this, Christmas is just a week away, and walking through the mall is a very different experience than it was during the latter half of the roaring '90s. I was at the Serramonte Mall in Daly City just a few days ago, and there were parking spaces galore. And this was on a weekend.

The walking dead of the dot-coms, all those employees who used to make huge wages, but then fell victim to the lack of a business plan, are starting to find jobs at places like Wal-Mart and local boutiques, one executive recruiter told me. Many are going into substitute teaching, even though, for many, their chief interest is a paycheck. I think it's great that we have more teachers, but I think it would be far better if these people actually wanted to be there in the first place.

The technology sector will rebound; there's no question about that. The tech sector has gone through tough times in the past, as have aerospace and biotech. But with all of the sectors hurting at the same time, it makes life bleak for those of us employed in those industries. But are there signs of life on the horizon?

In December, the Conference Board reported that its Index of Leading Economic Indicators moved up a better-than-expected 0.5 percent in November to 109.7 percent following a revised 0.1 percent increase in October. Analysts had forecast a 0.3 percent gain. That's good news, particularly when you consider the economic fallout of Sept. 11. Despite the attacks, consumers are still spending and companies are beginning to see some signs of life.

Other good news on the economic front: Housing starts are up. That's always good news in California, both because it's an important industry and because there's never enough housing and it always costs too much.

Probably the best news for the area is the reduction in the number of layoffs. I don't know if it's because the economy is getting better or if it's because there's no one left to downsize, but, at least here, unemployment stats are starting to settle down. (That said, Excite@Home shuts down at the end of February, Motorola announced layoffs of another 9,400 workers, NEC is cutting 1,200 and headhunting firms are seeing their numbers dwindle, as well.)

The best we can hope for now is that 2002 will indeed bring a recovery, with or without President Bush's stimulus package, which, as of this writing, is still being debated in Congress.

Companies that epitomized the dot-com era, such as handheld vendors like Palm and Handspring, are finding new sources of funding and customers. How can we have a comeback if we don't have a place to jot down the particulars? Personally, I still use the PDA on my watch, but I'm starting to get used to carrying my Palm again.

Biotech and security firms - corporate, computer and personal security - also look like good bets to grow in 2002, particularly in light of the concerns following Sept. 11. Not only are people scared about bio-terrorism, but they are also finding that they need to protect themselves in other ways. As a result, some vendors of computer security software are seeing sales of those niche products rise, as are vendors of firewalls and other system security products.

Storage companies have been hit pretty hard lately, but for large installations, storage is still more than half the total system investment. So while you can still pick up a disk drive for a song, look for some recovery in the storage-area network and network-attached storage arenas. These are big-ticket items, to be sure, but companies need to invest in their storage infrastructures.

We'll soon know if a recovery is indeed under way. There's very little you and I can do directly. All we can do is hope the gravy train arrives soon - I don't know about you, but I could use the ride.

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