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Electronic News, July 2, 2001 by Bernard Levine

Fed, new products, Microsoft--maybe things will turn around next year

NEW YORK--Is there hope for a recovery soon?

Maybe not this year, but the Federal Reserve Board's move to cut interest rates again, the growing corporate focus on electronic business strategies requiring mobile computing and other new products, and the latest court ruling bolstering Microsoft Corp. could provide some relief for the industry in the not too distant future.

Many top industry participants and analysts in New York last week for the annual PC Expo trade show, as well as a 40th anniversary celebration on Long Island for Hauppauge, N.Y.-based distributor Jaco Electronics Inc. see at least a glimmer of hope.

But you can probably forget 2001. "This calendar year is gone," said Joel Girsky, chairman and chief executive officer of Jaco (nasdaq: JACO). "What happens next year is an interesting question."

Also speaking at the Islandia, N.Y., Jaco event--a day before Alan Greenspan & Co. enacted their quarter-point interest rate cut, the sixth reduction this year--Robert Stovall, Prudential Securities senior vice president and senior market strategist, said, "Whenever the Fed cuts rates aggressively, it is a precursor of recovery." Nevertheless, he continued, "there is a global slowdown. It's going tote a tough third quarter. Sometimes it takes three months for August to pass, and the third quarter is historically the weakest."

The electronics industry may be in a slump right now, but loads of promising new personal and mobile computing products that could help pull the industry back out again were on display at PC Expo.

Continuing to invest in electronic businesses remains crucial in order for corporations to maximize efficiencies, was the word from Michael Splinter, Intel Corp.'s executive vice president and director of worldwide sales and marketing. Splinter gave a keynote speech at PC Expo/Technology Exchange Week.

"Despite booms and busts, the industry is still in the embryonic stage of the Internet and e-business build-out," Splinter said. "For companies to fully reap the benefits of e-business, they must demand collaboration from the technology industry to deliver a broad choice of high-performing computing solutions that are less expensive, more flexible and that don't require customers to rely on any one company."

He urged the audience to check out the range of products from numerous companies on display in the exhibit hall and showcased in his talk various new and pending products from Intel (nasdaq: INTC) and partners. Intel plans to introduce Pentium 4 processors at 1.8GHz and 1.6GHz this month, he said.

"It's been a really tough nine months or year for many companies," Splinter said. But, he continued, "think of e-business, the many efficiencies. Companies are still investing. We all know a recession will end. They never last too long. I believe Mr. Greenspan is talking later this morning and can help."

And later in the week, the Microsoft ruling lifted spirits even further (see News Flash, page 2).

Santa Clara, Calif.-based Intel is "trying to bring economics to all aspects of business computing, what we call macroprocessing," Splinter said. The company defines macroprocessing as a deployment model applying the volume economics, performance leadership and industry innovation found in the microprocessor to the demands and opportunities f the new Internet-enabled enterprises.

In another PC Expokeynote speech, Carl Yankowski, Palm Inc.'s CEO, discussed "Handheld Computing: Grass Roots to Corporate Standard." He noted "hand helds were a grassroots phenomenon, now rapidly evolving to a new computing standard in enterprises of all sizes-fueled by people's desire to be more connected, effective and efficient, virutally anytime and anywhere."

At the Jaco event, William Johnson, vice president of worldwide sales at Kemet Electronics Corp., said about last year's boom, "we all built inventory. It was not as good as it felt. Now we are working off inventory; it is not as bad a sit feels." Still, OEMs, contractmanufacturers and even distributors are cutting back people and capital construction, he said.

John Park, Samsung America vice president of marketing, told the Jaco audience "the tech sector is now struggling. In 2001, demand for computers, telecom equipment and the like has collapsed."

But many hope things will change next year.