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AFTER THE ATTACK

Tech Industry Expects Minimal Effect on Sales

Computers: Rebuilding effort isn't seen as significant revenue boost. Firms are relieved as airfreight resumes.

September 17, 2001|CHARLES PILLER | TIMES STAFF WRITER

SAN FRANCISCO — The beleaguered technology industry does not expect a significant sales boost from the rebuilding efforts after Tuesday's terrorist attacks.

And various tech companies, from chip makers to computer networking and PC firms, also said they do not expect shipment interruptions to impair their ability to meet already reduced quarterly sales goals.

This comes after some analysts have estimated that information technology costs to rebuild lower Manhattan will soar into the billions of dollars. But this effort will be spread over months or years and would amount to only a modest sliver of tech companies' overall revenues.

"Let's say we're talking about 100,000 people who need completely new infrastructure" in New York, said Martin Reynolds, an analyst with Gartner Group. "It's only one-tenth of 1% of the total [user base] . . . not sufficiently big to make a difference for large companies' financials."

Technical-services firms may see a bigger boost from the rebuilding efforts, as companies nationwide move to shore up remote data backup systems in the event of new terror attacks. This could help PC and chip makers, which provide equipment for data center storage.

"You'll get a small pop from rebuilding, but it's not enough to offset the general malaise" in the tech sector, said Roger Kay, an industry analyst with International Data Corp.

One possible weak spot, however, might be for software firms. That's because as much as half the sales of software licensing occur in the final month of their fiscal quarters.

But companies were relieved Friday as some airfreight shipments resumed. As shipping returns to normal levels, the impact from the week's disruption should be negligible, even for companies such as microprocessor giant Intel Corp., whose fiscal quarter ends Sept. 30.

"We're in the middle of the quarter, so I would just expect if the planes keep flying, the impact is going to be minimal this quarter," said Larry Carter, chief financial officer of San Jose-based Cisco Systems Inc., the leading network equipment supplier.

Intel said that the company's four chip-fabrication plants overseas have been shipping goods as usual, and that its eight domestic plants have not interrupted production.

And the leading PC company, Austin, Texas-based Dell Computer Corp., said that it has relied on ground shipping, and that orders have not fallen appreciably this week.

"The bottom line is there is no material impact on our business," Dell spokesman Mike Maher said. "Customers understand the situation, and they themselves are being flexible."

Analysts say that overall some portions of the tech industry may see a 1% to 2% shortfall in sales this year because of reduced productivity and lost orders after the terrorist attacks.

"It's an utterly horrible disaster, but most of the economic impact is confined to a few industries," such as financial services, Reynolds said.

Meanwhile, tech companies have moved to aid disaster relief.

Amazon.com Inc. placed a prominent appeal to raise funds for the Red Cross on its home page.

Amazon's donation meter updates the total funds donated in real time. By Saturday afternoon, more than 150,000 visitors to the site had contributed more than $5.5 million.

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