It’s interesting to read all the year-end reflections about the implosion of technology stocks.
After treating the sector as the second coming and running the stocks up through the roof on nothing more than momentum, Wall Street acted surprised to see it all come tumbling down. Now the question of the day is, is the sector down for good or can we expect some more unbridled optimism to run it back up?
There certainly are some black clouds out there. The telecom market as a whole seems like something of a mess, what with AT&T’s and WorldCom’s woes and the competitive local exchange carrier failures. And the stocks of perennial powerhouses Cisco, Microsoft, IBM and Oracle are all getting knocked around.
Combined, Cisco and Microsoft have lost about $500 billion in market capitalization (the value of outstanding shares) since March when they had both crested the $500 billion mark. Today, Cisco’s market cap is $297 billion and Microsoft’s is $255 billion.
Those are still astounding numbers, but the world has come to expect more from these market leaders. It isn’t enough that Cisco reported a revenue increase of 66% to $6.52 billion for the 13 weeks that ended Oct. 28. Some of the confidence about the future is gone.
That’s the baffling part. It is almost as if Wall Street is saying corporate America’s reliance on technology has somehow abated.
It seems to me the world has wrongly attached the technology sector to the dot-com phenomena. The tech sector unjustifiably rode up on the back of the dot-com euphoria and, when it evaporated, rode it back down.
But the failure of 100 or so dot-coms doesn’t change the need for your average company to become a networked enterprise. They need technology to increase efficiency, realize new business opportunities and achieve competitive advantage.
So is the air out of our tech sector for good, or are we simply witnessing a midcourse correction? I’m not a Wall Street analyst, but show me a major U.S. corporation that thinks it’s too well connected and I’ll eat this column.
My guess is that, as we get beyond the dot-com failures, we’ll see the Street come running back to technology. Whether the economy comes along with it is a different matter.
This story, "As goes tech stocks so goes the economy? " was originally published by Network World.