Did you know that the Diet Coke you just got out of the case is new? the cashier asked.
Hungry from a morning schedule full of staff meetings, I had just strolled into the deli for a quick sandwich. I had not heard any news since breakfast, so I was hoping to check the Web and get my lunchtime news fix on my IPAQ (via Sprint PCS) while I noshed on pastrami.
Wondering what the cashier was talking about, I turned the label towards
me and noticed that indeed my carbonated beverage now proudly proclaimed,
Diet Coke with Lemon. An avid Diet Coke drinker, I wondered how it was
that I hadnt been aware of this new variety of my favorite beverage.
After all, when New Coke came out, it had seemed as if the world had
stopped. The public was outraged. Coke had to revamp its entire business
strategy by bringing back the previous Coke as Coke Classic. Lets not
even get into the whole Cherry Coke phenomenon. Point is, the media
hyped every last one of these changes that the leading beverage companies
But times are different now. We dont get wrapped up in frivolous news
like the holiday successes of Barney the dinosaur, Pokeman, Tickle Me Elmo,
or Cabbage Patch Kids. Nor do we even seem to care anymore about
once-pressing matters such as OJ Simpson low-speed chases (or traffic
violations), and various government interns both missing and present.
Serious topics such as the current war, its tragic beginnings, and the
ongoing preoccupation with terrorists and their evil acts are foremost on
the mind of Americans these days. And if that wasnt enough, theres the
specter of an ailing economy that needs to be addressed. Id like to
discuss the latter, at least as it relates to technology and communications,
and so, I ask:
SHOULD WE WORRY?
At first blush, the answer seems to be yes, when you realize that the
economy has nose-dived so dramatically. How many stocks need to go from $250
down to $1.37 or even to 0 in one year before we assign the term depression
to the tech market? Lets take a closer look at the situation. Sure,
things are lousy now but I dont think they will remain so for very long.
There are still some very good reasons to remain optimistic about the
economy, including technology and communications. To wit
The consumer market is still very strong, making this appear to be only a
partial recession at the moment.
The housing sector while not as vibrant as September 10, 2001 is
still doing relatively well, considering the recent spike in unemployment.
Y2K corporate technology spending on specialized and general-purpose
servers as well as other equipment was immense in 1999. Expect a good
portion of these products, now outdated, to be upgraded or replaced once
again in 2002.
Year over year corporate earnings will be easier to beat in 2002 than
almost ever before. This has been a dismal year for profits, and the
slashing of tremendous overhead means much leaner companies will be able to
make the most of a small bounce in the economic environment.
Businesses are making ill-advised decisions right now because they are
scared and uncertain about the future. People are investing in items that
will offer a near-immediate return on investment. The long-term view has
taken a back seat in the corporate environment. I dont think this
situation can last very long, and I think many companies are all too aware
of it. While these companies have slowed investments in marketing and
R&D, they ought to realize that the spigot must be turned back on soon,
else they face a grave situation.
As a result of the above point, a good deal of equipment needs to be
replaced. I know of many companies holding off on new PBX and other
purchases but who really need to change out this equipment soon.
Subsequently, there is a good deal of pent-up demand for new capital
expenditures that will have to take place soon in order for companies to
function. This will give the tech market a much-needed boost.
Two words: Interest Rates. Rates havent been this low in 30 years and
they could still go lower. Loan refinancing is generating needed cash for
families and businesses alike.
Broadband: Dont look now but these fat pipes are still being adopted
at a good clip. Cable modems and ILEC-supplied DSL are giving consumers
competitively priced Internet service. Expect to see many new applications
such as broader acceptance of SOHO/telecommuting/consumer IP telephony
appear in 2002.
Windows XP: Microsofts latest and greatest OS is now standard
equipment on the latest laptops and desktops. Microsoft has embedded SIP
into this new OS meaning that IP telephony will enjoy greater acceptance and
interoperability than ever before.
E-commerce: I predict that December and the upcoming year will see
furious growth in e-commerce, perhaps not from a year-over-year perspective
but surely as a percentage of total sales. Part of the reason for success
will be some level of fear of traveling to malls, compounded by the simple
fact that shopping online is becoming easier and less expensive than at
brick and mortar stores by the day. Catalog retailers may also see some
decline in their holiday business as the fear of mail-borne pathogens such
as anthrax drives some percentage of their customer base to the Web.
On-demand computing: It may spur incredible innovation by allowing
corporations to harness supercomputing power over broadband networks. IBM is
just one company betting on this technology through their Grid Computing
Initiative. According to the company, grid computing promises to make
personal computers more powerful by harvesting idle power from other
computers. It will also let workers collaborate on sophisticated
applications via high-speed networks. When you consider that the cost of a
1.5-GHz computer is getting closer and closer to $500, you realize there is
a lot of available computing horsepower available. If harnessed effectively,
we can expect to see applications so powerful that they are as yet
A colleague of mine once said, Lets face it. Its not Ford that will
get us out of this economic slowdown. Meaning of course, that it will be
the adoption of new technology that does it for us. Expect the technological
innovation of America to continue to produce ideas that develop into new and
rapidly growing markets worldwide.
Productivity: This has been less of an issue as of late. There was a time
when productivity was of principal importance to corporations, and
investments in technology were made to keep our companies running as
efficiently as possible. Lately, weve focused on layoffs instead of
productivity. Once there is a slowdown in the current downsizing trend,
America will get back to the business of building the worlds most
efficient workforce fueled by the use of new communications technology such
as IP telephony-based devices, PDAs, and wireless broadband networks.
Should we be optimistic as regards the economy?
That answer remains elusive as, for all the great potential America has
to lead the worlds economy upward, it seems to me that corporations are
still sitting on the fence. We seem to be searching for a sign pointing more
clearly towards a recovery before some of the items in my above list will
come to pass. So what will the catalyst be? Will it be the achievement of
some military objective? Some positive earnings news next year?
A run-up in the stock market? The results of a government-led stimulus
package? Whatever it is, I hope we see it soon. In the meantime, expect me
to continue covering the latest events in the industry as closely as ever
and perhaps even closer. You see, I tend to work faster when I ingest
caffeine, and recently Ive become a big fan of that new Diet Coke!
To The December 2001 Table Of Contents ]