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Tech Economy Might Get Some Jolts

Yahoo! News, 9/17/01
By BRIAN BERGSTEIN, AP Business Writer

SAN JOSE, Calif. (AP) - High-tech companies that specialize in consulting, teleconferencing, network infrastructure and security are expecting a surge in business in the aftermath of last week's terrorist attacks.

But analysts don't believe it will amount to enough of a jolt to end the tech swoon that began in 2000.

“I don't think this is big enough to turn the ship, so to speak,” said Donna Scott, a research director at Gartner Dataquest.

The technology-heavy Nasdaq Stock Market index fell 6.8 percent Monday after trading resumed on Wall Street for the first time since the attacks. The broader Dow Jones index lost 7.1 percent.

Economists have predicted the overall economy could slide into a recession from drops in air travel and other consumer spending. That certainly wouldn't help most technology companies, which have laid off hundreds of thousands of workers this year to deal with slumping sales in saturated markets.

A Taiwanese research firm, Market Intelligence Center, said the attacks likely would “worsen the severity of America's declining (personal-computer) market.”

But some segments of the technology economy could get a big boost.

For example: tech companies that provide any form of security - online and in the physical world.

Companies including IBM Corp., Bedford, Mass.-based RSA Security and Silicon Valley's Counterpane Internet Security Inc. “will have more business than they can handle,” Forrester Research analyst Carl Howe predicted.

Shares of RSA Security, a provider of encryption software, jumped 7 percent Monday on the Nasdaq. Shares of Visionics Corp., a maker of face-recognition equipment and other security products that use biometrics - the identification of people through physical characteristics - soared 93 percent.

Several analysts have recommended that companies use video conferencing and Webcasting more often as an alternative to traveling.

Expecting such a trend, investors eagerly bought shares in WebEx Communications Inc., a San Jose-based seller of Internet communications platforms. Its stock gained 24 percent.

Shares of Polycom Inc., a Milpitas-based maker of teleconferencing products, were up 33 percent. Shares of video conferencing supplier PictureTel Corp. of Cambridge, Mass., were up 13 percent.

Both companies have made their equipment available for free to organizations affected by the terrorist attacks.

An estimated 26.5 million square feet of occupied office space in lower Manhattan was destroyed or damaged in the attacks and the resulting fires and collapses, according to the Grubb & Ellis real estate company. The disaster is thus a boon for companies that recover lost data and rebuild networks for displaced businesses, and that provide equipped-outfitted temporary offices.

One such services company, Rosemont, Ill.-based Comdisco Inc., said it has restored networks or relocated offices for more than 30 New York companies since the attacks.

Gartner Dataquest's Scott predicted that Comdisco and competitors such as IBM and Wayne, Pa.-based SunGard Data Systems Inc., will see sales rise as more companies see a need for their services.

If that happens, it couldn't come at a better time for Comdisco, which has filed for bankruptcy and is selling its tech-services business to Hewlett-Packard Co.

Comdisco spokeswoman Mary Moster said her firm actually wasn't expecting much of a short-term boost, because most Fortune 500 companies already have disaster recovery in their long-term plans.

Still, Comdisco and SunGard shares both gained 6 percent Monday.

Analysts said even companies that were well-prepared likely will need consulting and service help - a highly profitable line of business - from hardware and software companies.

The devastation also might accelerate the long-term trend toward using the Internet to decentralize information. Business software maker PeopleSoft Inc. has said it expects more demand in coming months.

But those specific bumps don't reflect other potential problems. Companies that rely heavily on fast shipping of parts - to keep inventories low and their manufacturing process lean and efficient - could be hurt by slowdowns in air traffic.

Both the leading PC maker, Dell Computer Corp., and the world's top manufacturer of computer chips, Intel Corp., transferred some air shipments to the ground last week.

But neither company said it was hurt by that.

Dell factories in Texas and Tennessee are served by suppliers relatively close by, and its overseas plants get most of their parts from components makers in those countries.

Intel also wasn't hindered because it performs most of its manufacturing overseas, spokesman Chuck Mulloy said.

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