A new kind of advertising aimed at the Silicon Valley market has emerged over the past two years. Rather than tout the latest gizmo, trumpet a new company, or fish for new employees, this bit of copywriting makes a dramatic pitch for cities or regions in the US that would like to snap up some hi-tech companies. Usually the regions fall fairly low on the national coolness-factor scale. But as costs here spiral upwards, their song becomes more compelling.
The latest is from the city of Duluth, Minnesota, "where success comes naturally", according to its tagline. Among other enticements, the full-page ad in the business section of local papers notes Duluth's natural setting and abundant outdoor activities. These, of course, are needed for youngish San Francisco Bay Area tech-lifestyle types with plenty of aggressive energy, who like Californian beaches and mountains and their related adventure sports.
Then there are state-of-the art facilities. Duluth has a new 225,000 sq. foot "SoftCenter" building with "OC 48 SONET ring feed, redundant fibre optic links, and 100 Base T wiring to all floors". But the real clincher is the first bullet point on the list of Duluth's attributes: abundant resources. "A reliable electric energy supply is a given," says the ad, smugly. Of course, California's electricity nightmare continues with no end in sight. One of the state's biggest utility companies, Pacific Gas & Electric, has filed for bankruptcy. The other giant, Southern California Edison, has negotiated a controversial recovery plan with California governor Mr Grey Davis, which small businesses complain will force them to pay off the company's debt.
In the meantime, consumers and businesses have seen gas and electricity bills surge, when the deregulated market was supposed to make them fall. And the rolling blackouts continue, most noticeably affecting the public when, for example, the San Francisco Symphony was recently plunged into darkness during its rehearsals.
Patrons of the evening's concert milled about outside and waited to find out whether the show would go on (eventually the lights popped back on, and it did). The symphony, like many worried technology companies, has now purchased its own generator.
The electricity crisis has made the notion of an always-on Internet connection meaningless. At any time and without warning, PCs may lose their power. State residents are encouraged to shut off appliances and conserve electricity as much as possible. For the conscientious, that means turning the PC on and off. Many simply leave it off and pick up e-mail once or twice a day.
All in all, this ridiculous and worrying situation underlines just how important resource planning across the economy is.
California is a large, powerful and diverse economy, able to buy power from its neighbours and thus create some cushion against this crisis. What about the Republic?
It seems incredibly difficult for this boom region to accept that the rumbles in the economy are not a temporary glitch before the big party starts all over again. But, as an in-depth report on the past year in the San Jose Mercury News says in its headline story, "The party's over".
For five years, the Merc has tracked what it calls the SV150 - the 150 largest publicly traded companies in the Valley. The paper then runs occasional special reports on that high-tech gang. In the past, the sections did plenty of gushing. This time around, the headlines are uniformly sombre.
"Stock valuations burst with bubble"; "Spectacular burnouts for shooting stars"; "Dotcommers thought the party would never end"; "Valley's flood of tech IPOs quickly dries up"; and "Reality check is painful". Some 34 companies have been dropped from the list entirely.
On the other hand, there's been surprisingly little movement among the top 20 companies, nearly all of which remain in the top 20, and there's been no change in the position of the top three: number one is Hewlett-Packard, two is Intel and three is Cisco. And the overall assessment? Despite the current severe downturn, "2000 was a very good year" for chip, software, networking, hardware and biotech companies. Shame about the dotcoms, though.
There's plenty to ponder in the report and the outlook for the sector in the short term certainly remains uneasy. On the other hand, I still believe much of this could have been predicted had so many not relied on the assumption that growth would always and forever continue upward, even in the face of numbers that just weren't adding up.
For example, everyone has watched the telecommunications sector grossly over-extend itself for two years - building global capacity through debt, financing loss-making Internet service providers and buying up bloated 3G licences.
These are the companies that bought - then stopped buying - the networking equipment from hard-hit companies like Cisco. Then, the lead-up to Y2K saw companies spend billions to clean up their code. In many cases, companies popped for whole new networks and the expensive software to manage them, since they had to do an overhaul anyway. What a surprise, then, that companies are cutting back on hardware and software and services costs in 2000 and 2001.
As for consumers, we've had a glut of new toys to play with for the past few years. Now, our PCs are so powerful that few of us see any compelling reason to upgrade yet again. We just don't need the new performance levels of the chips or a larger hard drive. We've bought hand-held organizers and new mobile handsets like crazy. We're kind of tired of all the techno-fuss. We've had a long, long bull run, and all the signs have been pointing towards a bear for some time. So why all the denial?
I think that many of the people buying and selling shares online, many of the people working in the tech industry, many of the venture capitalists and many of the journalists writing about the sector are just too young to remember that markets go down as well as up, and this has severely affected both the ability to evaluate and the willingness to accept the current change. These folks watched a market bloat on possibility rather than probability, on hype rather than achievable performance. It brought riches to some, high-paying dream jobs to others. They are used to market falls reversing themselves in days or weeks. Now they are in shock, waiting daily for confirmation that the market has "bottomed" and the steep climb and good times will return. Sure, it will bottom - but it may be months or even years away. Sure, there's much overreaction out there to what should have been expected slowdowns. And sure, there's still plenty of possibility. But yes, the party is over. Time to start the clean-up. And then think about the next party - because it will come again - but maybe opting for a bit less uncontrolled excess.
SV150 report: www.siliconvalley. com/research/sv150
Klillington@irish-times.ie
