Personal-computer sales have perked up remarkably, thanks in part to new consumer enthusiasm for laptops and the emergence of wireless networking and better affordability. Global unit sales of PCs should be up roughly 10% in 2003, with equal or better growth in 2004; laptops could grow twice as fast.
Cellphone sales, which had been flat in recent years, have shown vigor, too, as consumers snap up new phones with color screens, built-in cameras and falling prices. The strong demand for PCs and cellphones has boosted chip sales.
The one soft spot remains corporate information technology spending, which so far has improved only marginally.
“Fundamentals have had a split personality,” says Steve Milunovich, technology strategist and hardware analyst at Merrill Lynch. Consumers, he says, “used tax rebates to buy electronics for back-to-school, and we’ll probably have a decent holiday season,” as consumers continue to buy laptops, cellphones, DVD players, MP3 players, digital cameras, flat-screen TVs, personal video recorders and other gadgets. Mortgage refinancing freed up more consumer cash, adding to the spree. And, Milunovich notes, small businesses are spending on tech, too.
Silver Lake’s McNamee calls the period we’re in “the new normal,” marked by a return to traditional business metrics, like earnings and cash flow, rather than bubble-brained concepts like eyeballs and Internet time. In the new normal, consumer electronics are ubiquitous.
“Moore’s Law and the Internet have converged,” McNamee says, referring to exponential growth in chip speed. “Every month there are new consumer-electronics devices with compelling functionality at $199 or less. These are no longer expensive capital goods. You can buy a new DVD player for $99, a Roomba robotic vacuum cleaner for $199, iPods for a couple of hundred bucks.”
Some investors aren’t willing to put much faith in a consumer-led tech recovery, because historically consumers have accounted for only a quarter to a third of tech spending. But the real revolution could be that the balance is shifting. “The best and most innovative technologies right now are consumer directed, not enterprise directed,” McNamee says.
Another story talks about the innovation in technology:
“Innovation has to solve problems that aren’t being solved now,” posits Gordon Eubanks, former chief executive of Symantec and current CEO of Oblix, a Web-services start-up. The New Economy bubble, awash in greed and silliness, discredited the accomplishments of the Internet. “But if you think about what is happening today, the Internet is being embedded in everything, absolutely everything,” Eubanks points out.
For 40 years, engineers concentrated on building an architecture of exclusion. “The whole energy was all about building deep motes and castle walls,” he says. “Now we have a completely different imperative. We are trying to let the good guys in to our networks.”
If anything is dead, it is the notion of monolithic computer architectures built on closed, proprietary operating systems and databases. “In 1975, the thought of a Pentium chip was unfathomable,” he adds. “Years from now, we are going to do things at a scale that is inconceivable today.”
In computing, wireless mobility and portability will make tremendous strides. The reality of the connected home and office with seamless links between personal computers, appliances, stereos, televisions, telephones, cameras and the Internet will dwarf the monumental technological advances of the 1990s.
But what will the next new thing be?
“I can’t predict what the next equivalent of Internet will be. I wish I could, but I know it will happen,” says Shane Robison, executive vice president and chief technology and strategy officer at Hewlett-Packard. “Innovation is coming from all over the place,” Robison adds.
Audio and visual imaging is rapidly changing before our eyes. Tools and services that allow us to capture, manage, edit and view the images are constantly being rolled out. What’s more, a whole generation of teens and twenty-somethings has been using the Internet for nearly 10 years. Many of its members don’t even use e-mail and opt for instant messaging instead. This new generation will demand new and improved information technology, making the thought of an innovation draught ridiculous. “It’s just nuts for people to get into this space of looking backward rather than forward,” Robison says. “There is a ton of stuff going on.”