Magazine

High Tech: Playing the Rebound to Win


After three long years of downturn and tepid recovery, most chief executives in the U.S. are still playing defense -- cleaning up their accounting, reforming boards, and rebuilding profits. But animal spirits are beginning to stir in one sector of the economy: high tech. A growing number of CEOs in tech are positioning their companies for the coming upturn by making bold moves with big money. It's a refreshing sign that the risk-averse culture that has dominated Corporate America for so long is starting to break. CEOs throughout the country should take note. It's time to start swinging for the fences again.

Waiting could prove to be damaging. Those corporations moving to gain strategic dominance are likely to be large, cash-rich survivors seeking to take advantage of their smaller rivals. In high tech, Oracle Corp.'s $5.1 billion hostile bid for software maker PeopleSoft Inc. is an example. If CEO Lawrence J. Ellison succeeds, he can take out a significant competitor, reshape the $38 billion market for business-software applications, and make Oracle a serious No. 2 vis-à-vis current leader SAP.

Verizon Communications is taking advantage of cash-strapped competition by sharply cutting its monthly fee for broadband access by 30%, to $35, even as it rolls out a $13 billion capital investment plan to bring superfast fiber-optic cable to all of its customers. Microsoft Corp. is pouring billions into a new operating system, Longhorn, which will be more user friendly. IBM is investing in "utility computing" -- offering computing as a service via the Internet or private computer networks. Just plug in to receive applications. Intel Corp. is spending $16 billion on factories to churn out new wireless-communication chips for cell phones and personal digital assistants, while Sony Corp. is investing $3 billion on chips for the digital home.

Taken together, the strategic moves signal that the long-awaited pickup in the tech sector may be at hand. They show that as the upturn begins, the tech industry is led by a small group of CEOs willing to place hefty bets on the future. These managers have positioned their companies to play the unfolding economic rebound to win. How many CEOs in other industries can say the same thing?


Later, Baby
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