This year has seen not only the stoppage of the unprecedented growth of the computer industry, but an actual reversal of the upward trend. Virtually everyone in the industry has had to put up with a shrinkage in overall revenues. And next year doesn't look much rosier, according to industry observers.
It will be the second half of next year at the earliest before anyone in the industry can hope for a change of course, at least in the minds of an almost unanimous chorus of experts from the technology field. Many of these experts reiterated their views at the recent Comdex technology trade fair, the largest in the US, held annually in Las Vegas.
The market for personal computers has been particularly affected by the weak economy, says Crawford DelPrete, a renowned analyst from the market research fear IDC. This year, industry-wide revenue for PCs is expected to contract by about 10 percent. Next year, the market will most likely shrink by a further 7.5 percent, DelPrete says. The weakness of the PC market was visible even before the attacks in New York and Washington, but "September 11th heightened everything," DelPrete said.
The situation in the semiconductor market is even worse. Semiconductor firms are not only struggling with reduced volume, but also with a simultaneous price drop for memory chips and microprocessors. For the current year, DelPrete is counting on a revenue retreat of 35 percent. Next year this will shrink another 10 percent, he said.
But the same factors that are giving industry leaders a headache are music to consumers' ears. Never before have consumers been able to buy so much processing power and memory so cheaply as in the past few weeks, DelPrete said.
The market for venture capital, the money that helped inflate the Internet economy of the late 90s, seems to have all but dried up as well. A lack of available cash, though, is not necessarily the problem for companies seeking venture capital.
"Some US$45 billion are waiting to be invested some place prudent," says Mark Gorenberg from the California venture capitalist firm Hummer Winblad.
For now, most financiers are busy marshalling their existing investments in young firms in the computer and software industries. At some point there will be new investment again, however. "In the past two years, more information was created than in the entire period of human history before. You can only get this through intense investments in IT projects."
The tough market situation left its mark on the Comdex fair. Last year, some 200,000 information technology experts were drawn to this desert entertainment metropolis, but only 120,000 to 150,000 experts showed up this time around. Many firms cut out fair exhibits entirely as part of their overall cost-cutting measures. Several long-time Comdex guests who could have flown chose not to fly in light of safety concerns after the Sept. 11 terrorist attacks on the US.
Bill Gates, who traditionally gives the Comdex opening address, tried to use this year's address to bolster optimism through a lofty view of history. In 1942, Gates reminded his audience, in the middle of World War II, British prime minister Winston Churchill is believed to have said, "Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."
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