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Sat, Mar 16, 2002 - Page 21 News List

Harsh reality intrudes at IT trade jamboree

PARTY'S OVER The tone for the CeBIT trade fair in Hanover, Germany, this week has been downbeat in the face of an uncertain future for a troubled sector

REUTERS , HANOVER, GERMANY

A woman looks into a camera as her eye is seen on the screen beyond, during a presentation of the TrueEYE iris scan system by South Korean company Senex Technologies on Thursday during the CeBIT computer fair in Hanover, Germany. The iris scan system is considered to be the safest item among other biometric items and existing security devices.

PHOTO: AP

Harsh reality has elbowed aside hype and hope at the world's largest technology and communications trade fair, dashing any hopes the annual jamboree could mark a turning point for a troubled sector.

Color-screen handsets were sported by most leading mobile phone makers, but they are only expecting incremental improvements to sales and are not expected to bring back the 60 percent growth enjoyed in the late 1990s and 2000.

The tone for the CeBIT trade fair was set on Tuesday when Nokia, the world's leading maker of mobile phones, rained on its own parade, overshadowing a long-awaited handset launch with news of a sharp fall in sales from its mobile networks division.

Shares in telecoms equipment companies duly fell, the slide extended by an earnings warning on the other side of the Atlantic from Lucent Technologies.

Lucent's main problems stem from the boom-years when innovations and an exuberant financial climate led to huge overinvestments and overcapacity.

True, innovations at CeBIT this year were few and far between, Hewlett-Packard's German boss Heribert Schmitz told German television on Thursday.

But in the aftermath of Sept. 11 and the bursting of the tech bubble, companies are not interested in new gimmicks anyway. Instead, CeBIT attendees focused on ways of getting more out of their networks and means of making them more secure.

Sober mood

Everyone knew that the party ended long ago for technology and communications companies after an unsustainable boom, but the mood remains downbeat and the future uncertain.

"Expectations were far higher two years ago, the industry is going through a period of retrenchment," said Simon Scholes, an analyst at Bankgesellschaft Berlin who was attending CeBIT fair.

"CeBIT 2000 coincided with the top of the dotcom boom. Given that the [technology-heavy] Neuer Markt is now worth less than 20 percent of what it was two years ago, it is hardly surprising that the atmosphere is less frenetic and more sober," Scholes added.

The evidence is only anecdotal, but CeBIT veterans say visitor numbers appear lower than in previous years at an event which attracts hundreds of thousands of people, from Microsoft Chief Executive Steve Ballmer down to ticket-buying punters.

"Normally, it's like sardines. This year you can move around without any problem," said one Dutch-based analyst.

Organizers of CeBIT, which runs until next Wednesday, will not be drawn on visitor numbers so far but point out that they have added an extra day to the program this year.

Domestic strife

Nowhere is the future more uncertain than in the German telecoms industry, Europe's largest market.

The German subsidiaries of cellphone rivals Vodafone Group Plc and mmO2 both said here that they do not expect a mass market for new high-speed Internet services, the so-called third generation (3G) technologies, to emerge before 2004.

The hope is that 3G, allowing functions such as video streaming, will fuel a new era of growth.

Things could look very different by 2004, with most players conceding that six rivals are too many in a German market dominated by Deutsche Telekom's T-Mobile unit and Vodafone.

Ad Scheepbouwer, head of Dutch company KPN, owner of German No. 3 E-Plus, finally said that the day may come when it may seek partners or possibly even sell the company.

KPN said on Thursday it would take a massive 12.4 billion euro goodwill writedown on its investment in E-Plus, a telling sign of how valuations have declined in the sector since 1999.

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