You know the feeling when you're driving along and every traffic signal turns green just as you approach the intersections? Similarly, sometimes in bowling or baseball, the bowler or pitcher can seemingly throw nothing but strikes. In cases like these, we often say the person is "in the zone."
Last year when the economy was booming, it seemed as though everyone was in the zone and no one could do any wrong. Any product could be shipped. Companies in the communications and networking industries seemed to have a bright future, as did almost any venture that had a networking-oriented game plan.
Today, the industry is very different. Many communications companies and the companies that supply components to them are in trouble. The bowlers and pitchers are throwing nothing but gutter balls and walks. The zone is gone, and no one is quite sure when we might find it again. In our efforts to find the zone again, the government is lowering interest rates, and companies are decreasing staffs and overheads while reevaluating product lines to streamline offerings—placing some projects on hold and canceling others.
However, this has further shifted the zone out of range, albeit temporarily. More people out of work translates into fewer people able to purchase products. Companies that close down put surplus equipment into the market. That reduces the need for the more frugal companies to purchase new equipment/furniture. This in turn may cause office-furniture companies to slow down and lay off workers.
In the communications market, we have probably seen the worst of this domino effect. The dot-com closures have certainly had a direct effect on the economy. But other missteps by companies that work in the infrastructure arena further compound that problem. The investment needed to build up the DSL and cable modem infrastructure is probably one area where expectations were overzealous. As a result, a number of companies failed, and the ripple effect caught many large suppliers, such as Cisco and AT&T/Lucent, off guard.
Thus, these companies got stuck with huge amounts of inventory and unpaid bills that must be written down. This cost of doing (or not doing) business translates into reduced or cancelled orders to the component suppliers. Similarly, the cell-phone industry has been caught in a squeeze as it starts moving from second-generation to third-generation systems. It now faces the high overheads of the spectrum license costs and the expense of upgrading the infrastructure to handle next-generation handsets.
When will the tailspin stop and a realignment to the zone begin? What should we be doing as an industry and as a country to bring the zone back into alignment? The cyclical nature of the high-tech companies shows that the industry can recover and then grow even larger. We just have to find the zone.