Silicon Valley not immune to economic crisis

November 13, 2008 7:44:51 PM PST
The economic downturn is starting to take its toll on the often resilient technology sector. Job cuts and falling profits have been daily headlines this week. Now the global crisis is hitting home in Silicon Valley.

San Jose-based Cisco Systems held its annual shareholder meeting Thursday. Several long-time Cisco investors spoke up at the event.

Dorothy Miller says she set aside a Cisco trust for her grandchildren when the stock was $70 a share. A year ago the stock was trading at $30, now it is nearly half that price.

"Now my grandchildren are trying to go through college and that's not much help at $15 a share," said Miller.

The networking company's CEO, John Chambers, cannot be pleased either. October orders fell 9 percent from last year.

Chip maker Intel predicts its fourth quarter revenue will drop by 8 percent. Santa Clara-based National Semiconductor lowered its fourth quarter sales forecast by 9 percent. Applied Materials of Santa Clara says profits in the third quarter plunged 45 percent.

George Scalise is president of SIA, the trade association representing the $118 billion U.S. microchip industry. He says the once isolated tech sector is taking a hit.

"The evidence now is becoming quite clear that for the last month or so the impact of the financial crisis around the world is beginning to have some impact on the semiconductor industry," said Scalise.

Demand for products powered by Silicon Valley tech companies has slowed even in developing countries. What started with the housing meltdown became a global credit crunch. Spenders are few and frugal.

Many analysts hope government stimulus programs will start to yield results, but a growing economy all gets back to consumer confidence and among some investors, there is not a lot of hope for a quick turnaround.

"Everybody is telling me how much they plan to cut back and it's very hard when you've got children and grandchildren trying to figure out where you are going to economize," said Cisco shareholder JoAn Lambert.

Those in the tech industry fear the end of this year will be a telling indicator as to what is in store for the first half of the new year.


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