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Technology Executives Pessimistic About 2003 Prospects

Few at an economic forum in Switzerland would venture to predict an industry recovery.

January 27, 2003|From Reuters

DAVOS, Switzerland — Technology executives at the World Economic Forum scrambled to tone down expectations for 2003 after hard-learned lessons that their customers cannot predict the future.

From Microsoft Corp.'s Bill Gates to Michael Dell, founder of the world's second-largest personal computer maker, few were prepared to predict a recovery in global demand for technology after the Internet bubble burst.

"There's no big uptick," Gates told the World Economic Forum.

"It's OK, but not good," said Dell, chief executive of Dell Computer Corp.

Many of the chiefs of the world's largest technology companies spent the past days in the Swiss ski resort, host each year to about 2,000 political and business leaders.

The corridors have been full of talk of war on Iraq and the sluggish U.S. economy. But technology executives have been taking the pulse of their market, often in back-to-back meetings with customers, ranging from aircraft manufacturing bosses to the heads of global retail chains.

John Chambers, CEO of San Jose-based network equipment maker Cisco Systems Inc., who prides himself on being close to his clients, stressed the volatility of the short-term outlook.

A sales uptick like the one seen last spring, which was widely seen as the beginning of a recovery, was followed by a slowdown after the summer.

This was the reason Scott McNealy, CEO of San Jose-based network computer maker Sun Microsystems Inc. -- which had a better-than-expected October-to-December quarter -- was hesitant to call a trend.

"Anybody who thinks they can forecast has been proven dead wrong," he said.

This did not prevent other executives from forecasting how much money they expect to be invested in information technology after a virtually flat 2002.

Ulrich Schumacher of Infineon Technologies, Europe's second-largest chip maker, had predicted last year that 2003 would be hard to spoil after the industry's worst-ever downturn. Now he said, "In Europe, at least in 2003, I'm not very optimistic."

Some executives grumbled that the looming war in Iraq put a reward on being cautious.

To be on the safe side, most companies said, they had tightened their belts and were investing even less in new technology compared with 2002, when many already had cut their capital investments sharply.

KT Corp., South Korea's No. 1 telephone company, will cut investment by up to 10%, in a move that is typical for most telecom companies.

Eric Benhamou, CEO of hand-held computer market leader Palm Inc., based in Santa Clara, Calif., forecast modest growth in information technology spending and a slight decline in telecom investments.

Top chip makers such as Santa Clara-based Intel Corp., Switzerland's STMicroelectronics and Germany's Infineon -- which are among the world's biggest spenders on new technology together with telecom companies -- already have said they would trim budgets or keep them flat at best.

Cisco's Chambers voiced the new reality when he said that "tech for the sake of tech is over."

Carly Fiorina, CEO of Palo Alto, Calif.-based Hewlett-Packard Co., the world's largest computer maker, added that "this focus on value will be long-lasting." She saw no recovery in the U.S. economy yet.

Gerard Kleisterlee, CEO of Philips Electronics said he expected above-average technology spending growth in areas such as health care and security.

Sun's McNealy added that technologies' rapid obsolescence would continue to fuel demand.

"Tech still has the shelf life of a banana. It will quickly go brown and mushy. There's an opportunity to keep developing because people will need a new banana," he said.

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