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Rory Cellan-Jones

Technology - the party really is over

  • Rory Cellan-Jones
  • 8 Oct 08, 12:50 GMT

On Monday last week I wrote here that the technology party might be over, and that the gloom pervading the financial sector could begin to affect high-tech firms. Since then - gosh, it seems a long time ago - a few things have happened.

Man watching share price indexBanks have tottered, an entire country has gone to the brink of bankruptcy, the London Stock Exchange has suffered its biggest one day fall for more than two decades, and the UK government has unveiled a £50bn rescue plan for the banks. As Torrid Tuesday has followed Manic Monday, the BBC's crack alliteration team has been under enormous pressure.

And, almost unnoticed, technology companies have been sucked into this vortex of gloom. Let's look at a couple of companies beginning with A. Last Monday, Apple's shares opened at $128. Last night, they closed at $89 - and remember they had briefly topped $200 earlier this year. There has not been a shred of bad news about the iPod, the iPhone, or the iMac - but investors appear to have decided that these are just the kind of goods that hard-pressed consumers will now be more reluctant to buy.

On this side of the Atlantic, one of our more interesting technology businesses Autonomy, which specialises in search technology for big businesses, has recently entered the FTSE 100. But over the last week its shares have been tumbling as rapidly as the index as a whole. They started above £10, and last time I looked they were around £7.60. This despite a trading update in which the chief executive said Autonomy expected its third quarter results to be "significantly ahead of expectations".

The market has decided that the big enterprises which are Autonomy's customers will be trimming their spending too. And it's not just a few companies suffering - the New York Nasdaq and London Techmark index have been sailing steadily lower over the last 10 days.

So much for the big technology businesses - what about the fledglings? Bad news there too, I'm afraid. Not a single new technology firm has come to the stock market this year, according to the British Venture Capital Association. And further back the evolutionary chain, venture capital investment in start-ups is now stalling in the US, and it's hard to see that pattern not being repeated in the UK.

The reaction to this state of affairs by some is to decide that technology no longer matters and that the process of change will now go on hold for a few years. Or, as a colleague put it after overhearing me discuss some new smartphone: "The world is falling about our ears and all you can talk about is your silly little gadgets."

I think that is short-sighted. We are right in the middle of some fascinating shifts in the way we use technology - from the rise of social networking, to the mobile internet and the advent of cloud computing.

Last time we had a serious downturn in technology investment at the beginning of this decade, the world did not stand still. In a harsh climate, smart new ventures - from last.fm to Skype - were born, and consumer behaviour was transformed by the arrival of broadband.

So investors and entrepreneurs may be entering a chilly period when making money from new ideas becomes that much harder. But I think "silly little gadgets" will continue to transform our lives - and the visionaries who can look to the long-term and spot the Googles of the future may find that this is a profitable time to do business.

Comments

  • Comment number 1.

    Apple have approx. $20b in cash, so I wouldn't worry about them too much in the short term. They resisted the temptation to buy companies like Adobe, and it has worked out very well. Apple are not just a computer company, they are now Apple Inc., with products like the iPhone, iPod, AppleTV, computer business, the iTunes Music Store and the App Store, which sold 100,000,000 Apps in the first 60 days.

    Plus, they have 'fanboys' like me who will always buy Apple products, for as long as they are in business making amazing products. People will still sell their kidneys on eBay to buy the latest Apple kit.

    Just thought I'd insert fanboy as an off-the-cuff comment before some myopic individual decides to.

  • Comment number 2.

    May I suggest "Wobbly Wednesday" ?

  • Comment number 3.

    The party was still going at First Tuesday, the networking forum for tech entrepreneurs and investors, last night. Perhaps a little more muted than earlier this year, and everyone was realistic that massive amounts of funding are not available anymore. The emphasis was on creating a good business plan and getting funding for your idea a stage at a time. And there were plenty of microinvestors chatting up the innovators, from what I could see.

  • Comment number 4.

    Well I guess if you repeat it often enough, Rory, you will be able to help it come true. well done!

  • Comment number 5.

    An interesting question may be how much new technology (e.g. social networking etc) contributed to the melt down by spreading panic and lack of confidence....

  • Comment number 6.

    Companies like Apple and Microsoft will be fine because they have no debt and significant liquid assets.

    This is just the same nonsense that happens every ten to twenty or so years when the latest batch of bankers lend money to people who can't afford to pay it back.

  • Comment number 7.

    The problem to my mind is that many of the most interesting developments, particularly web-based ones, are free for users, so the business model is flaky to say the least. Much of their success either revolves around advertising (and only a handful of companies like Google, Facebook and Yahoo can shout from the rooftops as getting this right) or being bought out at some point.

  • Comment number 8.

    Over here in Silicon Valley, the party is definitely not over, and nor should it be. Web technology is at a very exciting time, moving out of isolated sites into a huge, interconnected infrastructure of web-based tools and applications. There is no shortage of people interested in building these things, and as yet no sign of any shortage of investors willing to throw money at them, to the order of tens of millions of dollars.

    A lack of IPOs merely indicates that now is not a good time to be offering your stock publicly, not that there are no good startups being created.

    P.S. How about Woeful Wednesday?

  • Comment number 9.

    I guess it depends on the technology. Anything that comes out that proposes greater productivity or cost reduction and is fairly quick to implement is going to attract lots of attention.

    The companies that fail will be the ones that can't show solid benefits.

  • Comment number 10.

    We were already in the middle of "Bubble 2.0" before the current round of difficulties: that was plain for everyone to see. Apart from those directly involved in the startups, I don't think the rest of us will notice much difference. Maybe there'll be fewer new Nokia models all doing the same thing in a slightly different box. And I won't be able to keep switching to VoIP startups to take advantage of their free calls, only to switch to somebody else as soon as they start charging. And I suppose there'll be fewer daily announcements of the next portal that's going to make the Mobile Web really take off this time.

    It could even be a good thing; a time of consolidation. Maybe people will start to look at the things they can do with existing technology rather than going off and buying new kit every month.

  • Comment number 11.

    Individuals will still want phones, tv's, cameras, games machines etc and will pay for them.
    The massive growth in the west will stop and the rate of improvement may slow however there is a huge potential for growth in the non-developed economies.
    In the mature economies we may have to aim for sustainable incomes and not for continued growth which is impossible. The world will become a better place!

  • Comment number 12.

    technology should be freely available to all.
    it matters not what happens to individual companies its the product that is paramount, big names have fallen before and others will rise, thinking back to commodore as an example.
    mankind will continue to push the envelope and minor glitches like a global decline will only slow never stop developement.
    when technology stops evolving it will be the end of mans use of his brain.

 

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