When it's earnings report time, the PR does flow
A few words on the technology market would be in order just now. The tech companies have finally found a way to get through the summer doldrums -- they lower expectations before reporting their results, and enjoy the bump in stock price when they do well, after all. This demonstrates that the PC market is maturing, since in a true early growth-stage market, there's none of this kind of pre-reports positioning.
In fact, the rate of growth for the tech market has slowed, almost across the board. There are a lot of PCs out there. And it's not clear how the industry will sell a whole lot more PCs in years to come. The NC or Webtop-box phenomenon represents one effort to break into the 60 percent of homes without a computer. But in many respects, this is an industry that is very similar to the automobile industry after the initial wave of car-buying in the '20s and '30s. There were some giants, General Motors and Ford, and a few little companies that struggled; many died or were consolidated into the big boys.
The PC market will probably "stagnate," if you can call it that, at the 15 percent growth per year level for some time to come. This week's results, which showed Intel Corp. and Microsoft Corp. can thrive on that kind of growth, while Advanced Micro Devices Inc., Apple Computer Inc. and others fall short, is evidence that the Really Good Companies are winning through management and marketing skill, not the sheer force of innovation -- a sure sign of maturity.
But this doesn't mean the ride's over. It does indicate that a very great challenge lies ahead: How to build a device and information/entertainment products delivered by that device, that will break into the rest of the consumer market, and reach around the world as television and radio have. Even the telephone hasn't pulled that trick off, as more than half the people in the world have never even seen a telephone, and more than two-thirds have never used a telephone, according to the International Telecommunications Union.
Innovation won't win that stage of the market either. It will probably be the companies that assemble great managers and production/cost-control systems to respond to the consumer through the ever-growing Internet. The real gating factor, though, may be the so-called "new" economy, which has to produce a significantly higher standard of living in order to unleash the next great phase of spending by households to join the information age. The automobile industry enjoyed its heyday in the '50s and '60s, when consumer spending went through the roof after World War II. If we've learned anything from the last century, the computer industry won't have to endure a war before the next stage of real growth.
Mitch Ratcliffe is president of Internet/Media Strategies Inc., a Tacoma, Wash., strategic consultancy (www.imstrat.com). He can be reached at godsdog@ratcliffe.com.