Tech Execs Forecast "Two to Three Quarters" of Recession

Tech executives speaking at the Web 2.0 Conference say things will get better, but not before they get worse.

By David Needle | Posted Nov 10, 2008
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SAN FRANCISCO - Tech execs gave a dour assessment of the near-term impact of the faltering economy on the tech industry. "My sense is this is the deepest 'economic downturn' I've seen in my lifetime," said Paul Otellini, CEO of Intel at the Web 2.0 Summit here last week.

"The smart people I talk to think we'll have two to three quarters of recession and gradually come out of it in the U.S. and then the rest of the world follows," said the Intel chief.

But the effects of the downturn could be felt longer than two or three quarters. "We're likely to see a lag and much larger unemployment a year from now, which will weigh on consumers' psyche," Otellini added.

That said, Otellini and other speakers here noted several reasons for optimism and, at the least, ways for companies to get through the current problems. Otellini said he met recently with government officials in China, who told him the country's Gross Domestic Product next year would be a healthy nine percent.

GDP is a measure of the total flow of goods and services produced over a specified time period.

"They are putting in place programs to encourage buying," he said. "They are the second-largest PC buying country in the world and they buy lots of consumer goods. So that's good for the world and it puts cash back into the system."

Highly-regarded Silicon Valley venture capitalist John Doerr had an equally pessimistic view of the current economic crisis, though he ticked off a number of initiatives he thinks are needed to kick start the economy.

"For the life of me, I haven't figured out what's going on in this financial crisis," which he said is much deeper than problems with home loans and the mortgage industry. "I think it's a crisis in confidence in our leaders, the government and money."

He said the response so far by government has been "disjointed, inadequate and comical. It makes no sense at all to have these people thrown out of their homes when you can reissue their mortgages."

He also urged those startups with great ideas but struggling to hang in there. "I think those companies that do emerge, will emerge much stronger." Though he also added it's likely to be a long haul to a sounder economy and profits.

Doerr said he's encouraged by reports that President-Elect Obama would name the nation's first Chief Technology Officer. "It's a great idea and long overdue," said Doerr.

Asked to name his picks, Doerr said he thought either Sun co-founder Bill Joy (currently a partner, along with Doerr, at Kleiner, Perkins, Caufield & Byers), or computer scientist and inventor Danny Hillis would be great choices.

Doerr hopes the new administration does more to encourage education. "We need more smart people and a program to double the number of engineers we graduate each year, from 30,000 now to 60,000." He said India currently graduates about 300,000 engineers a year while the numbers are in decline in the U.S.

He would also like to see changes in immigration laws to keep more talented people in the U.S. "We bring in foreign nationals, train them and make them go home," said Doerr. "I would staple a green card to their diplomas in the physical sciences and engineering," he quipped.

The Web Opportunity

Otellini said the good news is the basic pattern of growth on the Web hasn't changed. "Every piece of data shows consistent growth. Web traffic, ads and the number of people online are up," he said. "That's been undiminished throughout the various economic cycles and I think it will be undiminished here."

He suggested rather than focus on market turbulence, entrepreneurs should look at what products can be developed to take advantage of the growth of the Web.

Article courtesy of InternetNews.com

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