Growing a Business in a Recession

May 29, 2009 — -- The great companies of high technology are at the starting line and waiting for the pistol to fire. When they come out of the blocks, it's going to be a dazzling sight … and our lives will change in the process.

Most of us see the current economic downturn as a particularly nasty recession -- one that, given Washington's current fiscal strategy, is likely to leave us with both a ton of debt and very slow, inflation-driven recovery. But for the electronics industry, driven by the unrelenting pressure of Moore's Law, downturns are merely interregnums between booms. They are a time for consolidating resources and staff, abandoning low-performing product and market ventures … and most of all, stealing the march on competitors by gearing up new products for the return of demand.

That's what's been going all over the tech world over the last year. While we've had our attention elsewhere, smart companies -- not to mention those firms that haven't been too distracted by plummeting sales -- have been gearing up for the next generation of products. Now, as they queue up in the months before the formal introduction of those products, we are starting to get some early -- and exciting -- glimpses of what that future will be.

To my mind, the single most important piece of technology news last year, though few people noticed, was Intel's announcement that it would continue to maintain its current level of R&D investment despite the recession. In other words, no matter what happened, Intel was going to keep Moore's Law moving forward. As CEO Paul Otellini told me when I interviewed him for the Wall Street Journal, he wasn't going to be the guy who had Moore's Law die on his watch.

Why was that important? Because what happens upstream in the world of chips sets the pace for everything that happens downstream in computers, smart phones, videogames, servers and, ultimately, in social networks, Google, Twitter, Facebook, etc.

Intel's gutsy decision to keep spending billions of dollars on new products when the rest of the world was tightening its belts meant that the company (if it didn't commit suicide in the process) would be perfectly positioned to own the semiconductor industry when the economy turned upward. [Indeed, if I was buying stock these days -- which I can't do as a journalist -- I'd seriously consider loading up on those guys.]

But, just as important, Intel's announcement provided those tens of thousands of downstream companies, big and small, the assurance that they could still plan for the future, extrapolating their future products out on the exponential curve of Moore's Law. That may not seem important, but in fact, in the digital age of which all of us are citizens, it is almost everything.

When you know the performance, price and size of the new generation of computational engines, you also know how small, how powerful, and how inexpensive you can plan to make your own products; what features you can add to your Web site or social network; and what level of experience you can bring to your online or video game.

Knowing that the next generation of Intel chips will be there on time -- indeed, many have already appeared on the market, along with those of other competitors such as AMD and Samsung -- has meant that electronics manufacturers, from servers to consumer electronics makers, have been able to continue pursuing new product development without worrying about being stuck (as happened to Dell and HP when Microsoft was months late with Vista) with a supplier who can't meet the deadline.

And that, with great confidence, is just what they've done. And now we're starting to see the results. Consider the news items that have leaked out just this week:

AT&T has hinted that it plans to upgrade its current HSPA 3.6 standard for 3G networks, to the new 7.2 standard by 2011. What does that mean? It means doubling the speed of wireless networks from the current 3.6Mbps to 7.2Mbps. That's impressive enough; but the big story behind the news is that 7.2 will likely mean a whole host of cool new applications for 3G smart phones -- not least, the Apple iPhone, which could soon sport such features as video chat.

Meanwhile, on the other end of the smart phone world, the companies that have adopted the Google Android platform are feverishly at work, as well. HTC, which pioneered Android smart phones, is now gearing up to introduce its new "Magic" phone, a gorgeous-looking little device complete with a trackball and an eye-catching display. It's just the kind of design leap Google was hoping for when it created Android and made it available to developers as an open platform.

Let's not forgot that this is also the week when the world finally got a chance to play with the new Wolfram Alpha "computational search engine." It's not exactly what people thought it would be, but it does represent a noble attempt at rethinking the entire notion of Internet search. Alpha, combined with similar initiatives by Yahoo and Microsoft ("Bing"), hints that this market, long owned by Google, soon may find itself back in a competitive war.

Did I mention Microsoft? Even the aging barons of Redmond, Wash., seemed to have used this downturn to rouse themselves from slumber. Not only is System 7 on its way to replace the much-maligned Vista, and not only does the company appear to be in full stealth mode on the aforementioned Bing, but it also seems to be readying its iPod Touch "killer," the Zune HD. This new device, which features HD radio, wireless Wi-Fi, and a great-looking, organic LCD screen, probably won't make much of a dent in Apple's dominance, but it will likely make Microsoft a real player, at last, in the handheld electronics world.

Oh, and lest we forget, Guitar Player 5 is coming this fall as well …

That's just one week folks. Now, add to that the new Amazon Kindle of a couple weeks ago, and the announcements from the electric car makers, including Tesla. And we've still yet to hear from some of the other big players in tech, including HP, Motorola, Cisco, Nintendo, Sega, Samsung and Oracle. Put it all together and you get an idea of just how big the 2010 Tech Juggernaut is going to be.

And it all starts this autumn. After the last six dreary months, I can hardly wait.

This is the opinion of the columnist and in no way reflects the opinion of ABC News.

Michael S. Malone is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, The Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is the author or co-author of a dozen books, notably the best-selling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the ABCNews.com "Silicon Insider" columnist since 2000.