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Message subject : Stock Swings Chip Silicon Valley

This message was posted by Webmaster on April 10, 2000 :

After a turbulent, unsettling week on Wall Street, once again Silicon Valley leads the rest of the nation into a new era. This time, its the age of anxiety. Think you were nervous about the ups and downs of your stocks? In a space of three hours last Tuesday, high-tech firms in Silicon Valley lost --- and then regained --- an estimated $200 billion in value as the Nasdaq and Dow stock indexes dropped more than 500 points before rebounding. Things were shaken here at the epicenter of the New Economy, where Yahoo!, Intel, Cisco Systems and a thousand other tech companies large and small line the palm-fringed, traffic-choked freeways. The course correction. The bursting bubble. The Internet shakeout. After last week, what was once talked about about in hushed tones of doom is now openly spoken of as inevitable. "Go to the gym or a coffee shop and its all you hear," said Geoff Baum, 31, vice president of marketing for Garage.com, a Palo Alto firm that matches start-up companies with investors. "Its made people realize that the boom is not going to go on forever. Theres a feeling of vulnerability here now that wasnt felt before." It is a sobering thought for many in affluent Silicon Valley, who have seen their fortunes soar for years without having to think much about money in the way much of the rest of America does. "Its making everyone nervous," said Dan Carter, 34, a software systems salesman who in the past month has seen his tech-heavy stock portfolio erode. Since it hit its high on March 10, the Nasdaq has fallen nearly 12 percent. Carter, a Connecticut native who has worked in Silicon Valley for 10 years, has two young children. Last weeks stock gyrations spooked him into a move he had long avoided. He is planning to shift part of his high-risk investments into a stable, low-yield haven for his childrens college education. Silicon Valley is sobering up. Some say it is growing up. "Theres a younger generation working here who have never seen a downside. Theyre walking around like stunned raccoons," said Paul Saffo, a director at the Institute for the Future, a research group in the valley city of Menlo Park. "This is a breath of reality." Last weeks drop in stock prices, fueled partly by fears that Microsoft Corp. will be broken up following a federal judges ruling in the long-running antitrust case, prompted major banks to advise their cyber-clients to hold off on plans for initial public stock offerings. Fear spread among Silicon Valley executives, many of whom were counting on the value of their stock options to cash in on the high-tech gold rush. This may be the birthplace of the "new economy" and the most conspicuous reveler in its prosperity, but it has no monopoly on worry. The nations run of economic good fortune relies heavily on high-tech companies, which have spread from Silicon Valley and Microsofts home in Redmond, Wash., to places like Austin, Atlanta, Boston and the suburbs of Washington, D.C. "We dont run our business by the daily changes in the price of our stock. We run our business to ultimately reward our shareholders," said Bob Zwerneman, vice president of investor relations for S1, an Atlanta-based online financial services company. "I doubt any employee of any technology company rushed for the exits simply because Wall Street had a hiccup for a day, even a major hiccup, as it were." Rich Macchia, chief financial officer of Internet Security Systems, said a few employees called him earlier last week to ask about the markets fluctuation. "It was more curiosity than concern," he said. "We dont get too concerned about one or two days action. It really hasnt had an impact. Most employees realize that with a great company, if you produce the results the stock market is going to take care of them in the long run." Today, thanks to the growth of mutual funds and 401(k) plans, about half of all U.S. households own stock in some fashion, up from just 32 percent in 1990. With the economy humming since 1992, unemployment has fallen to record peacetime lows and the nations personal income rose 68 percent during the 1990s, fueling a consumer spending binge. "The new economy is spreading its tentacles into the old economy, and as that spread continues, what happens here is going to have a greater impact on the rest of America," Saffo said. The signs of worry extend beyond last weeks stock stagger. Investors Business Daily reported Thursday that 165 tech companies that have gone public since the start of 1999 are trading below their offering prices, despite the Nasdaqs 90 percent gain over the period, and 51 of those stocks have lost at least half of their original value. Some perspective is required, though. Silicon Valley may be jittery, but the dot-com generation here is far from broke. High-tech talent is in short supply. Hotels in the valley are full of free-lance programmers flown in for contract work. To beat its competitors to the punch, Nortel Networks recently hired about one-third of Santa Clara Universitys senior class of computer engineering students, signing them five months before they graduated for jobs reportedly ranging in pay from $53,000 to $72,000. There is an often-told joke here about the prospect that flimsy Internet firms might go under. Because Silicon Valleys campus-like corporate headquarters are usually no more than two stories tall and are surrounded by thick, green lawns, the joke is that when despairing Internet executives jump from the roofs, they simply get up unharmed and start new companies. "The pain is only short-term," said Ken Rhie, 43, a Harvard MBA turned Silicon Valley millionaire. "For the talented, every failure represents another opportunity."

Source- The Atlanta Journal-Constitution



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