Small Tech Companies Starve

The high tech sandwich is missing the meat.

The high tech sandwich is missing the meat.

Over the last 30 years, the United States has built, in the form of the electronics business, the most dynamic, innovative and -- the petroleum industry aside -- most valuable industry in history. These strengths have in turn enabled the U.S. to create millions of jobs to absorb a growing population, kept the country competitive against new challenges in the global marketplace, and through new inventions improved the health, the quality of life, and the prosperity of its citizens.

It is an amazing achievement, and centuries from now people will look back in wonder at how we ever did it … and, unfortunately, with equal amazement, that we let it slip away.

And it is all now slipping away.

It may not seem like the high tech industry is in serious trouble. On the contrary, if anything the news of the last week seem to suggest an entire market sector beginning to recover from the devastating recent recession. Microsoft is preparing to introduce Windows 7, a much-improved version (compared to its predecessor, Vista) of its industry-dominant Windows operating system.

Cisco Systems, armed with a giant war chest, is back to its old ways -- buying two multi-billion dollar companies in the last week. Google is introducing a new music search application. Twitter has announced that it is finally earning money -- and has teamed up with Microsoft's Bing search engine.

But biggest of all was the news this week that Apple Computer recorded a spectacular 25 percent quarterly jump in revenues to nearly $10 billion -- most of it coming from iPhones and, amazingly given that the entire PC sector is growing old, Macs. Even slumping iPod sales couldn't slow the Apple juggernaut -- and, appropriately, the stock market responded by driving the company's stock to a record high.

Put all of these stories together and it's hard not to conclude that Silicon Valley and the rest of high tech are roaring back from last year's crash and heading into yet another of the industries quadrennial upswings.

Meanwhile, and more anecdotally, this comeback is also visible on the ground. Valley real estate, for example, suffered about a 20 percent drop in value last winter -- and though we weren't quite Fresno, the cities on the periphery of Silicon Valley did suffer a devastating number of foreclosures. At the same time, a lot of office building construction was either put on hold, or just finished facilities sat empty. Most tellingly, because for me this is the ultimate economic indicator, I didn't have to set aside extra time to get to meetings and luncheons (what few I had during those days), because the highways were half-empty, as the entire Valley just seemed to stop dead.

But in the last couple months, I've noticed that home prices have been creeping back up to their pre-crash values as folks with long commutes from the East Bay and Central Valley take advantage of the moment and buy into the Valley. The foreclosed homes as well have all-but disappeared. And if the new buildings and homes aren't being built, the completed ones are slowly filling up. And, most important, I found myself the other day stuck in my car muttering about the damn traffic -- something I haven't done in nearly a year. Meanwhile, I used the time to look around at the new cars on the road around me.

As I said, on first glance it's hard not be optimistic about the near future of the high tech industry.

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