The knife wielded as telecom boom turned to telecom bust seems to have cut most deeply into the world’s array of technology manufacturers and suppliers. Telcos may have wept with pain and many of those established to challenge them cried blood, but technology developers and manufacturers were caught out by events and left with gaping holes in their corporate infrastructure.

Much of this was self-inflicted. Chipsters, router-wallahs, switch-meisters, opto-pussies and all the others who supply the building blocks of technology went a bit crazy. While Fed chief Alan Greenspan could airily (if presciently) speak of “irrational exuberance” in the stock market, the hardcore hardware players discovered that the real meaning of “excess inventory” was its exact equivalent on the shopfloor. Thanks to a sudden collapse in demand and the non-negotiable precepts of Moore’s Law, they found themselves stranded with warehouses full of unsaleable products and battalions of unemployable staff.

Factory gate prices? Forget them. Factories were sold and their gates were dismantled even as hundreds of thousands of workers were walking through them for the last time. Meanwhile, some particularly hideous and well remunerated bosses adopted the ‘two legs good, four legs bad’ philosophy of corporate governance: we know best.

Risk aware but not risk averse
So manufacturers are making a return and perhaps this time they are carrying their employees – as opposed to only their bosses' egos – with them. Indeed, for all that the bosses of many companies have absolved themselves from all responsibility for exaggerated forecasts of demand and the related ramping up of staff (‘human inventory’) levels, you can argue that those jobs, created on artificially inflated grounds, have only been lost because reality has re-asserted itself. No great consolation if you are numbered among that human inventory, of course.

The point here is that, having grown unsustainably (however you choose to measure it: share price, payroll, etc) only to plummet dramatically, technology suppliers – or at least those who survived – have now become conditioned to respond to market moves in a more level-headed and cautious manner.

On one level that is good news and reflects the fact shareholders are too wary to write the sort of blank cheques that fuelled the crazy years. Indeed, judging by the ambivalence with which shareholders in large technology corporations have responded to timid suggestions of ‘good news’, it seems that for the time being nobody wants to revisit the boom.

But does this mean Redux is on hold? Not necessarily. The aforementioned ‘good news’ is accumulating with pistons of sector growth such as Intel and Cisco seeing steady but sustained improvement ahead for the first time in years. This makes a pleasant change from doleful complaints of a ‘lack of visibility’ to which the market had become accustomed in the aftermath of the implosion.

Yet a balance needs to be struck. If you think of the nature of the industry and its reliance on continuous innovation (Moore’s Law again), terms such as ‘level-headed’ and ‘cautious’ seem ill-placed. Can vendors prosper in such a dynamic market while seeking to keep their collective heads below the parapet? This is, after all, still an industry which rewards original thinking coupled with bold decision-making.

Marxist philosophy
In this respect, the fly in the ointment may still be found at the helm of such enterprises. Most corporate chiefs who presided over the rise and falls of telecom and technology vendors remain in charge. In most cases, they are still paying themselves handsomely (or obscenely, depending on your point of view). They are also visibly itching to get excited anew about market conditions, having had quite enough of sackcloth and ashes over the last five years. A sense of corporate machismo lurks beneath the surface of the industry and the men (yes, they are mostly men) in charge can’t wait to switch back into ‘my order book is bigger than yours…’ mode.

Maybe major investors and massed ranks of shareholders can apply a sanity clause to the born-again megalomaniacs of the industry. They have shown precious little sign of that so far, unfortunately. And, as Chico Marx pointedly observed in ‘A Night at the Opera’, “you can’t fool me; there ain’t no Sanity Clause.”
Jim Chalmers

Tomorrow: The regulators: quis custodiet...?