According to Sanford C. Bernstein's Vadim Zlotnikov, there is now a higher percentage of technology companies trading at more than twice the market multiple than at the peak of the bubble. Out of a universe of 600 tech companies, 55% are trading at more than twice the overall market multiple on 2004 estimates. (That figure includes profitless companies.) In March 2000, the figure was 49%. ... The fate of tech stocks could well lay, oddly, in the hands of the central banks of Japan and China. They have been steadily been buying Treasurys, keeping interest rates low. If they stop playing that tune, tech stocks are likely to be the sector left chairless.  [JESSE EISINGER, Wall Street Journal, Dec 31]

During the 1990s, people thought modern-day alchemy had been discovered in the transformation of electrons, optical fibers, and secret programming codes into market value. But innovation does not automatically lead to profits. Economic history teaches us that when a wondrous new product is invented, its price generally falls as other firms enter and imitate the product, rapidly eating away at the profits. In fact, with a few exceptions, companies producing innovations on average earn no more than a normal return on their investments. Virtually anyone could, and apparently did, set up a dot-com making use of the Internet, and the market was flooded with electronic greeting cards, on-line grocery shopping, free Internet service, and similar companies that were losing money in order to make sales. After the gold rush ended in 2000, according to recent data, new economy firms appear to have earned lower profits than those in the rest of the economy.  [WD Nordhaus, New York Review of Books, Jan 15, 04]

9.      Anything can happen for a while!  As Schumpeter said, only “when things have had time to hammer logic into men” is it safe to assume that some level of rationality will characterize economic outcomes.  Market discipline and economic natural selection constrain outcomes over time, but in the short run “anything can happen.”  [remarks of Sidney Winter on the life of Dick Nelson (economist)] 

Worldwide spending on computer-related equipment and software will rise as much as 8 percent next year as the economy improves and companies replace aging machines, market researcher IDC said. ... While spending may never return to the 15 percent annual gains of the 1990s, Framingham, Mass.-based IDC said corporations are no longer freezing their budgets.

Let’s call it trickle-down technology: the tendency of high-end renovation, and even military research, to eventually work its way down to mundane, even tacky consumer items. For example, could the inventors of the original laser, struggling in labs during the 1950s, have ever imagined that their research would lead to the combination laser pointer/windproof cigarette lighter?  [Peter J. Howe, Robert Weisman and Chris Gaither,  From high tech to mall tech  , Boston Globe, Dec 22] 

What do you think were the technological lessons of 2003? Internet Time: Today's leader can become tomorrow's also-ran before you can say "AltaVista."  ... You Never Have Enough Storage Bill Gates, famously, once said that 640 kilobytes ought to be enough for anybody ...  You Never Have Enough Bandwidth  ... Mobile Gets a Little More Mobile ... Write to realtime@wsj.com, and we'll post selected comments this Thursday  [Tim Hanrahan and Jason Fry, Wall Street Journal, Dec 22] 

Tennenhouse threw millions at sensor research. He set up an Intel facility at UC Berkeley and told his researchers to use their imagination to develop new configurations and applications. Three years after that landmark trip to the East Bay, Intel's sensor investment remains trivial compared to the billions it has plunged into, say, the new Centrino wireless chip or its Flash memory business. The entire annual Berkeley lab budget is about $5 million. But in this case, Intel is acting more like an angel investor - one with $15 billion in the bank - feeling around in the dark for something that's not only different, but transformative.  [Brendan I. Koerner, "Intel's Tiny Hope for the Future", Wired Dec 03]  Millions for innovation, billions for established products. Just like the government's approach to SBIR. Existing programs have iron triangles of vested interests that form a defensive budget shield to grab every available dollar by arguing present benefits over future breakthroughs. 

Technology Review's tally of R&D spending at 150 top technology companies shows good news and bad news. In telecom and electronics, budgets have been slashed. But the overall total of R&D spending is up more than $4 billion over last year--the increase led by the biotech and automotive sectors. Our data-rich table (an expanded version of the one that appears in the print issue of Technology Review) ranks the R&D investments by companies in every corner of technology.  http://www.technologyreview.com/scorecards/index.asp

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."  [MARK VEVERKAM , Barron's, Nov 17]

According to Baumol, innovation is the tour de force delivering a level of economic performance unmatched by any rival economic system. [David Audretsch, Journal of Economic Literature, Sep 03, reviewing The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism the Growth Miracle of Capitalism. By William

Public Progress.  Although the NASDAQ fell 3% Wednesday, a semiconductor company, AMIS went public raising $600M. But the leading percentage loser, Zarlink Semi, was also a semiconductor company that has seen its stock plunge with the bubble from $30 to $1 and now back to $4. 

Nathan Myhrvold, a former top Microsoft researcher, blasted IBM and AT&T for retreating from basic, long-term research. ...  Myhrvold said IBM and AT&T Bell Labs are doing some good work, but they are "shadows of their former selves."  IBM views its mission as the "near-term health" of the company, which is a "disastrously stupid thing to do," said Myhrvold. With IBM collecting billions of dollars a year in patent and technology licensing, the "rational thing to do if you are running IBM," would be to "shut the rest of it down and do research," he said. AT&T's Bell Labs is in an even more dire financial position, with most of the company losing money while long-term patents provide hundreds of millions of dollars, Myrhvold said.  [Steve Burke, Tech Web, Sep 24]  What. large bureaucracies focusing on short-term results? Just like much of the government mission agency R&D, including and especially their SBIR. 

Got A Better Idea? Be Prepared and Be Persistent.  It's hard to walk into a building and show 2,500 engineers something they should have done, says inventor Paul Fenelon who found a fortune buried inside the door of his Lincoln Town Car. A dramatically new window  regulator that  is less than half the weight of the arm-and-sector design, 2 pounds rather than 5. It is quieter by 5 to 10 decibels. It requires 40% less electrical power and has just 10 components, as opposed to 24. It also requires no grease, a huge nuisance in assembly plants.  So prove it!  In order to win over manufacturers, Fenelon had to test his invention seven ways to Sunday. He built a contraption that opened and shut the windows of a modified Ford Explorer 35,000 times. He installed his device into a Ford Crown Victoria, the model abused by so many cops and cabbies, and slammed the door 100,000 times to see if vibrations would wear it down.  [Jonathan Fahey. Forbes, Sep 29]  If you are the bright type with a PhD, you have only the beginnings of the tools needed to get the world to buy your idea. Converting science into innovation takes real world ingenuity and persistence. Getting the government, for example, to fund even a Phase 2 SBIR only gets you onto the first rung of the ladder. Looking for a role model for the trip up the ladder?  Look to the CEOs of  the SBIR companies that have gone public; pay no attention to the CEOs of the companies with 100 SBIRs. 

What do these towns have in common: Albuquerque, Austin, Bentonville, Dayton, Denver, Omaha, Racine and Tacoma? They are the birthplaces of firms that created 17 of the top 25 personal fortunes. ...  put your chips on cities that: a) attract smart people; and b) are low-cost enough to incubate a business so it won't need much outside capital, which is dilutive to wealth building. In other words, look for cities with these attributes: Universities. Especially those with strong science and engineering; Stellar K-12 education.  Smart people want smart kids; Capital for experimentation. This is an underrated factor. The presence of local funds for research and development; Capital for business risk. Necessary but overrated. The best entrepreneurs bootstrap and only much later take outside money; Low taxes and light regulations. [Bit of a free lunch syndrome here because schools and infrastructure cost real money]; Love of creative mess. Central planning always fails; Inclusive optimism.  The best places welcome outsiders; Respect for the risk-taker. [Rich Karlgaard, Forbes, Oct 4] Governments, local, state, and federal, take note. Government schemes like VC funds aren't the place to put your tax dollars for economic growth; they will be taken over by people with the wrong agenda. Build an infrastructure, a hard job in politics that looks for the quick hit and press release before the next election. (Witness Steven Pearlstein's essay The High Cost Of Not Spending To Modernize , Washington Post, Sep 24)

I hate being sold. New-product propagandists annoy me. Innovation entrepreneurs oozing charisma over their brilliant ideas also fail to persuade. As the poet observed, “A man convinced against his will is of the same opinion still.” In other words, while I’m happy to change my mind, I’d really rather change it myself.  That do-it-yourself attitude is at the stubborn heart of a major marketing dilemma for innovators. Persuading potential customers that your innovation is indispensable is one thing; getting them to persuade themselves of that fact is quite another. ... The challenge for innovators is to get potential customers to taste, sample, and play with technologies that reduce their natural—or acquired—resistance to innovation. [Michael Schrage, MIT Tech Review, Sep 22]   SBIR proposers have an easier problem - the feds MUST spend money on SBIR. If they have to choose among inferior ideas, too bad. Real customers, though, have the option of buying nothing, and often have to convince some boss to spend on your product. 

Your technology will spread through the world, say Comin and Hobijn of the New York Federal Reserve Bank,  in a pattern of trickle-down diffusion that is remarkably robust across technologies. Most of the technologies that we consider originate in advanced economies and are adopted there first. Subsequently, they trickle down to countries that lag economically. Our panel data analysis indicates that the most important determinants of the speed at which a country adopts technologies are the country's human capital endowment, type of government, degree of openness to trade, and adoption of predecessor technologies. We also find that the overall rate of diffusion has increased markedly since World War II. 

Innovation Mantra Not Enough. Microsoft (and nearly every other technology company) likes nothing better that to wrap itself in the flag of "innovation." It's what these companies talk about when they can't come up with a good example of how a customer will use, enjoy or otherwise profit from what they're currently selling.  [Lee Gomes, Wall Street Journal, Sep 22]  Innovation should also not be confused with an advance in knowledge. Many SBIR proposers offer nothing more than giving the government more knowledge than it had before; if the government wanted only that, it could get it with a lottery among the horde of decent scientists in the USA. Whatever you offer has to mean some value to someone willing to pay for such value. 

Economic forecasting is difficult. That's not because economists are dim, or influenced by conflicting agendas. It's because they're human and are no better than the rest of us at seeing the future. What they can do better is work with sophisticated mathematical models that analyze lots of past data and one way or another suggest that if this, that, and the other thing happen, the economy (or some portion thereof) will do such-and-such.  [Marc Gerstein, Multex Investor, Sep 22]  

Small businesses create three out of every four new jobs, make up half of our GDP, are responsible for a majority of innovations, and represent 99% of all employers. So the House of Representatives' Small Business Committee has created the Small Business Index, reflecting the current economic conditions facing small businesses. The only trouble is that the index is at a five-year low, down more than a third since the peak in 2000. In the second quarter of this year, the index stood at 72.16, down from the first-quarter level of 72.39. If small businesses are so important, it will be extremely difficult for the U.S. economy to fully recovery without them.  [Seattle Times, Sep 21]

Most slide presentations are as excruciating as a badly dubbed chopsocky action flick. So we sought help from the black belts of this mysterious craft.  1. Stun them with wordplay; 2.Beware the fonts of fury; 3. Plot your moves craftily; 4. Illuminate your words; 5. Make brevity a virtue;  6.  Control your impulse to go Hollywood; 7. Be at peace. [Anne Schukat; Business 2.0, Sept 03]  As a government guy with money to pass out, I saw far too many slide presentations that sent the wrong message.  Most presenters told what they new best with little regard  for what I wanted to know about their technology and their company. CEOs did much better because they were interested in how the technology could go somewhere. Whatever you do, DON'T show word viewgraphs; either you have to read them to the briefee or you have to force the briefee to listen and read different words at the same time . Pictures that tell your story crisply and unforgettably, figures of merit that whose significance the briefee can grasp, a concise description of what you want from the briefee. 

Building a Better R&D Mousetrap By posting their scientific conundrums online, companies like Eli Lilly and Procter & Gamble have discovered a rich new source of brainpower. ... Instead of relying solely on the company's 6,000 researchers and occasional help from outside firms, he could put those puzzles to thousands of bright freelance minds -- easily reached through the omnipresent ... In 2001, Lilly decided to test Bingham's idea. It invested a few million dollars to launch a startup, called InnoCentive, to serve as a kind of Internet dating service,...  Bingham would put a bounty on the answer -- for example, offering $2,000 to anyone who could devise a cheaper process for making BTCA, a chemical compound used to manufacture polyester and carpets. ... InnoCentive charges clients like P&G about $2,000 to post an online query, which now carries an award ranging from $5,000 to $100,000. Freelancers who think they've nailed problems submit confidential reports or ship solutions they've made in their labs; then InnoCentive staffers either validate or disqualify the work.   ....  Researchers  must agree to work on spec, and must relinquish all rights to the research. ...  InnoCentive boasts a 40 percent solution rate .... 53% of InnoCentive's researchers live outside the United States. [Paul Kaihla, Business 2.0, Sept 03]

there are still good reasons to believe that IT will have at least as big an economic impact as electricity, with average annual productivity growth of perhaps 2.5% over the coming years. One is that the cost of computers and communications has plummeted far more steeply than that of any previous technology, allowing it to be used more widely throughout the economy. Over the past three decades, the real price of computer-processing power has fallen by 35% a year; during 1890-1920, electricity prices fell by only 6% a year in real terms. [The Economist, Sep 13]   When you propose a handout from the government, you ought to have some higher goal than your being smarter about some technical stuff. Productivity is a great selling point for industry, although SBIR managers are not likely to be turned on by it. But the non-mission agencies, might have a manger or two thinking about national goals. Whether the particular agency values productivity gains or not, it is good practice and shows your strategic thinking to analyze your technology as a productivity tool. If you are going to sell it later, your highest goal, you will have to make convincing talk about it then. 

Bottom line: Despite the lessons of the tech and telecom bubbles, speculation is very much alive again on Wall Street. ...  The 18-member semiconductor index has risen 56% and the Street.com's Internet index is up 57%, ...  The Amex biotechnology index is up 42% year-to-date ....  Semiconductor capital-equipment stocks are being touted by numerous Street analysts, based on 2005 price/earnings ratios, partly because it's nearly impossible to justify buying them based on multiples of more proximate earnings. ... there isn't much room for disappointment  [ANDREW BARY, Barron's, Sep 15] 

Every month at Merck, groups of scientists in different areas of disease research gather to evaluate the latest breakthroughs. But the innovations they haggle over don't come from Merck's own laboratories. They're generated someplace, anyplace, else: journals, conference reports, patent literature, and visits to other labs. "We scour the world," says Merv Turner, Merck's senior vice-president for external research. At the end of the meetings, each group typically flags a couple of innovations for a small team of scientists to investigate. Last year, one of the brain trusts tagged Amrad Corp., a tiny Australian biotech company that's working on a promising drug to treat respiratory diseases. By June, Merck had ponied up $5 million to seal an exclusive license and a multiyear research collaboration with Amrad that one day could be worth $112 million. It's just one payoff from Merck's "very aggressive antenna function to survey what's going on in the outside world," Turner says.  Welcome to the future of corporate research. [Jay Greene, John Carey , Michael Arndt, Otis Port, Business Week, Sep 22]  What works for Merck could work for the government, and simultaneously work for the US economy, if the government would let it. Outsourcing R&D ideas in programs like SBIR to be more driven by company breakthroughs than driven by government ":requirements" would bring in a lot more exploitable ideas. 

What is the single most important ingredient for technological innovation?  MIT Tech Review voters say Money 13%, Creativity 64%, Hard Work 22%. 

News items cadged from MDA's Tech Transfer pages: 
Nitronex raises $11.3 million in Series C funding;
Cree launches production of its RazerThin LED products;
NVE reports commercial product revenues more than double in first quarter;
Celsion announces $9.6 million in new capital;
Kyma Technologies obtains $4 million in its Series B round of funding;
Boston Applied Technologies introduces new generation of Acrobat polarization management devices; . 
Third Wave Systems will provide high speed machining simulation support to Stork Fokker for Joint Strike Fighter program.

The good tech news is here. Fundamentals in technology stocks might be better than at any time in the last three years. Demand is up, as people are buying cellphones and PCs and businesses order info tech. But it's just not good enough.  Things are neither better than expectations, nor do they justify valuations. It should surprise no one if traders start selling on the news. [JESSE EISINGER, Wall Street Journal, Sep 10]

Innovators who keep their eyes open for unexpected results—and quickly take advantage of them—reap the biggest rewards.  ... In his book ”Why Innovation Fails”, Carl Franklin quotes an intriguing study by three academics [who] looked at 197 product innovations, of which 111 were successes and 86 failures. ... the products that failed were based on cutting-edge or untested technology, followed a “me-too” approach, or were created with no clearly defined solution in mind. ... But the clear winner in the innovation stakes was “taking advantage of random events”, which generated 13 times more successes than failures. ... Weeding out the likely losers early in the innovation chain before development costs escalate would free up untold resources to apply either to widening the search for new ideas, or concentrating all efforts on the surviving few.  [The Economist, Sep 6, 03]

to be great you have to defy popular opinion or the status quo. However, I admit that we can also learn from Napoleon's downfall. Entrepreneurs succeed when they see what others don't, when they get ahead of the market. Entrepreneurs fail when their vanity and their success blind them to their faults. They succeed by seeing what others can't, and fail by refusing to see themselves.  [Dale Dauten , the Corporate Curmudgeon, Minneapolis Star Tribune, Sep 3]

technology innovation works a lot like a forest: Fires periodically sweep through, seeming to destroy everything. Yet before long, grasses and wildflowers sprout from the ashes in a timeless cycle of renewal.  Today, tech is poised between the dying embers of the bust and the first green blush of the upturn. It's in fallow periods like these that the seeds of tomorrow's Microsofts and Ciscos sprout. ...  maybe what I discovered has a chance to produce something big. Indeed, the journey itself made me realize things weren't as dead as they seemed. It's possible the catalyst for tech recoveries is really the collective efforts of these kindred souls, all striving to zero in on what's next. Maybe that quest never really ends.  [Robert D. Hof, Business Week, Aug 25]  One place you can be sure where the forest will NOT sprout is SBIR awards for projects that merely paint existing tree leaves a different color. 

Is there now less incentive to use innovative products?  A. (Nick Carr) Almost any innovation can be replicated by competitors. So it's not enough to be the first company to use this new, innovative technology and thus gain an advantage over competitors. The question is: How long is that advantage going to last? As the first company investing in it, you're going to pay a lot more, so you have to be assured of having that advantage that allows you to charge more or produce at a lower cost long enough to recoup that investment. The advantage that it has provided simply isn't lasting long enough to make it economically worthwhile.

The biggest danger to U.S. workers isn't overseas competition. It's that we worry too much about other countries climbing up the ladder and not enough about finding the next higher rung for ourselves.  [By Michael J. Mandel, Business Week, Aug 25]

High technology's main street is showing signs of life again. ... Ideas for start-ups are bubbling, and infusions into early-stage companies were up 43% in the second quarter ... After three years of tight budgets, corporations are eyeing new technology, particularly products that can buoy in-house research and development or guarantee a rapid payback in cost-savings. Entrepreneurs, some of them victims of corporate layoffs, have had time to formulate more pragmatic ideas that fit the changed environment. ... Mayfield's Allen Morgan likens the environment to the aftermath of a forest fire: "If you look up, you only see scarred pines, devastation and you miss the point. If you look down, there's a profusion of damned near everything growing out of the ground."  [Ann Grimes, Wall Street Journal, Aug 28]  As always, unless you intend to peddle your technology to the cost-insensitive Defense Department, it has to make economic sense for industry to buy it. 

While semiconductor investing remains flat, interest is high in start-ups aiming to solve one of that sector's biggest problems: how to minimize the heat generated by ever-shrinking, more powerful and cheaper computer chips. It's nice to have a little laptop, but not one that burns your knees, says Alexander Wong of Apax Partners.

Industry executives are salivating over the streams of new, valuable physiological data from sensor-wearing patients. With a few fairly brilliant algorithms, researchers hope to predict impending heart attacks or strokes, using the data to create a new service business. Says Robert Langreth, Forbes, Sep 1  about the newest schemes for implanting monitors in the body. 

Reap the Wind  Don Quixote would quickly run out of lances in Denmark, a country that produces about 15% of its power with windmills. This site sponsored by the Danish Wind Industry Association promises to teach visitors everything they want to know about wind power "short of becoming wind engineers." Breeze through the site's FAQ or dive into in-depth discussions of engineering, turbine location, economics, and environmental benefits and costs. For example, turbines with one or two blades are cheaper and lighter than the three-bladed models, but they are noisier and must spin faster to produce the same amount of energy. Although wind power is pollution-free compared with fossil fuels, it does take a toll on the environment. The whirling blades kill birds, the site notes, but far fewer than fall victim to cars and powerlines.  www.windpower.org/en/core.htm  [Science, Jul 4] 

Technology is a queer thing. It brings you great gifts with one hand and it stabs you in the back with the other.  -- CP Snow 

May You Live In Interesting Times   Larta VOX Publisher Rohit Shukla argues the U.S. can't have it both ways, calling for free trade and the opening of markets when we want to sell products and services to other countries, and then balking and backtracking when the shoe is on the other foot.

"The New Economy" demonstrates a welcome awareness that high-tech innovations may have little economic impact by themselves: "General-purpose technologies do not arrive fully formed, accompanied by a grand design or blueprint describing how they should be used." It is only when new technologies are followed by equally radical changes in business practices and modes of production, in a "symbiotic relationship between technological and institutional innovation," that periods of great economic prosperity can unfold. [Peter Dizikes, reviewing 'The New Economy'  by Roger Alcaly, Washington Post, Jul 13]

Silicon Valley Is Acting Like It's 1999.  In what appears to be a repeat of the '90s boom, stocks of unproven tech firms are soaring as venture funding and the IPO lineup are growing.  "Please God, Just One More Bubble." ... "Part of the advantage of Silicon Valley is that it has no memory. That's how it can continue to innovate.  [David Streitfeld, LA Times, Jul 13, 03]

there are signs that business spending has stopped its long decline and is even beginning to inch back up. But there's just as much evidence that businesses are still wary about making new investments: Many are now optimistic enough to consider new purchases but not enough to follow through on them. That means frustration for entrepreneurs  [GREG IP, WALL STREET JOURNAL, Jul 7]

In 1999, US organizations spent over $250B on research and development, according to the US Department of Commerce, and this is growing at over 8% a year. The return on investment for successful R & D is extremely high. Companies generate $18.70 in sales for every dollar of investment in R & D. Innovative companies, defined by "percentage of revenue generated from products less than 5 years old", experience profit growth at four times the rate of non-innovative organizations (Source: Business Horizons, 1996). [Imaginatek, Jul 03]  What do you think the return to the nation is on SBIR spending? Forget asking, the feds will never measure it. Not only do they not know how, they don't want to learn. 

Capital spending dropped at an annualized pace of 4.8% during the first quarter.Ouch.Want more? Capital spending is down 14% from late 2000. Business spending in the first quarter fell to a low since the third quarter of 1998. New orders for non-defense capital goods, a pretty reliable predictor of near-term spending, also have been falling. Companies are willing to spend to keep equipment and operations running, springing for an extra toner cartridge, but that's about it.... Despite the plunge in interest rates during the past year, companies aren't borrowing money to expand their businesses. Sure, they're heading to the bond market to raise money. But more often than not it's to refinance existing, higher-rate debt or to replenish ailing pension plans.... Lower interest rates are nice, but the economy got into this mess because companies spent, invested and otherwise blew through much too much money during the past decade. There's an overload of capacity in many sectors, which feeds the deflation chatter.[GREGORY ZUCKERMAN. THE WALL STREET JOURNAL, Jun 27]

Experts reckon an enterprise has to start with around 3,000 bright ideas if it is to come up with 100 worthwhile projects, which, in turn, will be winnowed down to four development programmes for new products. And four such development programmes are the minimum needed to stand any chance of getting one winner. [The Economist, Jun 19]  Attention, government technocrats: a bright idea is something new, not an improved computer model of a rocket plume. 

hundreds of millions of dollars are being raised on the promise of the next big thing - the "optical chip."... our offices, homes, cars and in some cases even our hearts, could not function without the power of the microchip. ... Like LNL, Infinera said its chip controlled photons at micron levels - roughly 1/50 the width of a human hair - and could be modified easily to fit into any piece of optical-networking equipment. ..But, consider.... [The Promise of the Optical Chip, By Jim Lorick, LARTA, Jun 23] 

Having a bad quarter in a for-profit firm (no, not an SBIR mill, a real for-profit)? Dump all your bad news into that quarter. Contract electronics manufacturer Solectron posted a huge net loss for its latest quarter, in part from its latest restructuring effort, and forecast unexpectedly weak performance in the current quarter..... The latest quarter's results included a $1.92B goodwill write-down, a $721M deferred tax-asset allowance and $384M in restructuring charges.  [San Jose Mercury News, Jun 20] 

Economic Engine Sputters.  May was the 26th month out of the past 28, the NFIB reported, in which small companies cut more workers than they hired. [Jeff Bailey, Wall Street Journal, Jun 17,03]  Oh never mind, the politicians won't give up on warm fuzzy convenient images. Indeed, when a political policy doesn't yield results, they prescribe a bigger dose. Like more SBIR/STTR with evaluation watered down. 

Mr. Rutledge, who is 65 years old and has been analyzing tech stocks for 35 years, remains as skeptical as ever. His message: "I think this market run-up has been insane. There is no evidence of an upturn in demand" for tech gear.  [ES Browning, Wall Street Journal, Jun 16]

Need a Zippy Net on the Road?  Business Week (Jun 23) says hotels are starting to offer free broadband as a competitive come-on. Wingate, Comfort Suites, Hilton Garden Inn, and maybe Marriott Courtyard. 

Got the Next Big Thing?  Regarding "Segway's Breakdown": I thought big-name venture capitalists were supposed to help their companies with management advice and expertise. So how come John Doerr never explained "early adopters" to Dean Kamen? With any new product, there is only a small group of people willing to pay high prices for first-generation technology. The rest of us prefer to wait for improvements and price drops. Why did Kamen, or his backers, think the rules would be different this time around? 

Chip Growth Shrinks.  Semiconductor chips will rise only 10% this year, says the Semiconductor Industry Association which halved its 20% estimate of six months ago. [Reuters, Jun 11]

It is not that Moore's law has suddenly ceased to apply. In fact, ... The real issue is whether this still matters. “The industry has entered its post-technological period, in which it is no longer technology itself that is central, but the value it provides to business and consumers,” says Irving Wladawsky-Berger, a senior manager at IBM and another grey-haired industry elder. .... the technology industry has already gone greyish at the temples since the bubble popped, and is likely to turn greyer still. Sooner or later the sector will enter its “golden age”, just as the railways did. When Britain's railway mania collapsed in 1847, railroad shares plunged by 85%, and hundreds of businesses went belly-up. But train traffic in Britain levelled off only briefly, and in the following two decades grew by 400%. ... Brad DeLong, an economics professor at the University of California at Berkeley, puts it somewhat more succinctly: “I am optimistic about technology, but not about profits.”  [The Economist, May 10] 

"You should live so long?" After a 16-year cycle of boom, it is unreasonable to expect the readjustment to take less than 16 years. We are in for a very long period where the economy will not grow very much. This is intensified on a world basis by the deteriorating caliber of our political leaders. Bush has no fiscal sense whatsoever and is radical in his approach. The Republicans live solely to make the rich richer. The Democrats have no leaders or leadership and are barely conscious of the major issues of the day, which include growing unemployment, lack of affordable housing for the poor and the low end of the middle class, lack of health insurance, deterioration of our infrastructure -- our bridges, roads and sewer systems -- growing water shortages, drugs and crime.   [Seth Glickenhaus (Octogenarian money manager) Barron's, Jun 9]

In a 1999 article he wrote about the stock market, Warren Buffett said great ideas and great technologies often don't translate into great investments. The airline industry and auto industry have changed the world with their technology, said Buffett, but both have been financial disasters. ''Products or services that have wide sustainable moats around them are the ones that deliver rewards to investors,'' wrote Buffett.  [Charles Stein, Boston Globe, Jun 8]  SBIR hopefuls should adopt the same hard-headed economic approach to asking government for money to develop new technology. Not because the government cares much, but because it is a huge opportunity, potentially disabling, cost to do government research with no future for the company. Remember that the government does CARES NOTHING whether your company lives or dies after the contract research is delivered. 

Whoever Has the Money Gets the Ears. Silicon Valley is queueing up to hear government guys tout their programs., notes Ann Grimes (Wall Street Journal, Jun 5). Why? That's where the money is.  Last week's AE(lectronics)A affair had more takers than seats to hear Homeland Security's technology buying plans.   $60 billion on tech. "That's a lot of money, especially in Silicon Valley, where times are tough and it's a depressing place to be right now,"  Animal Spirits Aprowl.  The optimists are unloosing their animal spirits among some of the SBIR tech stocks over the last few weeks. Implant Sciences has been jumping up and down, yesterday up 27% to 2.5 times its 52-week low. Kopin was up 13% to triple its 52-week low. Cree nearkty triple, EMCORE triple, and  ATMI double its 52-week low.

For the past month, sales of motherboards, the hearts of computers, have collapsed in Taiwan. ... Some say the quarter's weakness reflects an even slower market for PCs than anybody is willing to accept. And that's not good news for Intel.  [LESLIE NORTON, Barron's, Jun 2,03[  Nor is it good news for the small companies who supply Intel and its ilk. On the other hand, the commercial disdainers of the New England Innovation Alliance needn't worry since they sell research to the federal agencies and have only to worry that a bad report on SBIR's impact on the USA would undercut political support for the handout.  

Technology stocks, many of which have rebounded sharply since the market bottom in October, probably are in for more disappointments as many businesses face oversupply problems that will hold down margins for years. [Floyd Norris, New York Times, May 31] 

Investors clearly believe in their hearts that technology has different characteristics from other industries: that it grows faster, is more profitable, has more operating leverage and will produce some sort of killer app during the next several years to spur another leg of growth. "Most of that is nonsense," Pip pipes in.  ... Analysts expect chip makers to have revenue growth of 10% this year, producing 57% earnings growth. Next year, the expected revenue growth of 15% is supposed to boost earnings 62%. Contrast those with forecasts from analysts for the closely linked software industry. This year, they expect 3% top-line growth and 2% bottom-line growth. Next year, they see 5% sales growth with only 11% earnings growth. "We are still holding on to this fantasy that nothing much has changed in semiconductor land," Mr. Coburn says. In fact, there's hyper-overcapacity and lower demand. Revenue growth might be only half of what it was on average for the past four decades or so, he predicts.  [JESSE EISINGER, Wall Street Journal, May 29]

There are signs that SARS is penetrating technology stocks' immune systems. .. If you want to know what the future of U.S. tech companies holds, look East. In Asia, production has slowed sharply as SARS has slowed down the economy, inventories have built up and consumer demand for PCs and cellphones has fallen off drastically. For many tech companies, such as Intel Corp., Asia had been the last growth engine.... What are the ominous signs? Memory-chip prices are plummeting. PC inventories in China are at around 15 weeks to 20 weeks, compared with the normal six. The Taiwanese motherboard makers, which are a leading indicator of PC and semiconductor demand, had disappointing bookings in April, and May looks slower. Korean handset shipments fell more than 15% in April from March.  [AHEAD OF THE TAPE, By JESSE EISINGER, Wall Street Journal, May 27]

There's no particular hurry, either, for businesses to invest in new plant and equipment when there's far too much existing plant and equipment. One other thing: we wouldn't make too much of the supposedly strong recovery in profits. A big chunk of the improvement comes from slashing payrolls and we're down to the bone there. ...  But this market is only paying lip-service to fundamentals. It's got a "please don't disturb" sign hung out front while it indulges its revitalized impulse to blow bubbles. Volatility readings are minuscule, which means that investors are convinced the only thing they have to fear is fear itself.  [ALAN ABELSON, Barron's, May 27]

Red Herring Redux.  Jason Pontin admits things got out of hand the last time he ran a specialty magazine on an industry promising to change the world. But he says he learned his lesson and won't allow his new biotechnology publication, the Acumen Journal of Sciences, to clone the meteoric rise and fall of Red Herring, a magazine that paralleled the boom and bust of the high-tech startups it once covered.  The San Francisco-based Acumen Journal, backed by former dot-com entrepreneur Eric Greenberg, made its debut Thursday with the modest goal of publishing five issues this year and attracting 30,000 readers before 2004.  [Associated Press. May 25, 03]

Prince Charles is leery of it. Activists want to ban it. Michael Crichton has written a scary bestseller about it. And financial analysts predict that it will be a trillion-dollar global business in a few years.  ... And nanotechnology is coming on fast. "For the first time in history, a technical revolution will approach the abruptness of a political event," writes William Atkinson. ... Atkinson's "Nanocosm" is a good substitute, an irreverent, comprehensive romp, by an experienced science popularizer, through the many fascinating details of the nano-world -- including portraits of the colorful figures who helped to "discover" it. "The Next Big Thing Is Really Small" by Jack Uldrich (with Deb Newberry), is another helpful book, a breathless but nevertheless handy nano-primer that sketches the many ways in which nanotechnology will change how we live and work.  [RON BAILEY, Wall Street Journal, May 23]

Enormous sums of money were lost in the great Internet bust, and analysts are still wringing their hands over the industry's fall from grace. Has technology, one economist recently wondered, become "just another crummy factor of production"?  But something more was lost in the bust. It has nothing to do with money, at least not directly. It has to do with people and history, with what might be called industrial memory. ... But more than jobs have been lost. To listen to Mr. [Doug] Engelbart that day almost five years ago was to realize that the computer industry, when it started, was not simply about becoming a chief executive or retiring on stock options at 35. It was to remember that real innovation — the stuff that made computers so much more than "crummy factors of production" — comes from mysterious places, wild people, dreamers and tinkerers, and to remember all the skepticism they had to endure.  [ELLEN ULLMAN, New York Times, May 22]  What do you think the federal R&D agencies are thinking as they manage innovation programs like SBIR? Can they see innovation as a needed disrupter, or are they trying to grip the present which they think they understand? 

Research is Just a Cost.  as John Grebenkemper, a veteran engineer who came to Hewlett by way of Compaq and Tandem Computer, rehearsed his presentation for the research group, he could not help quietly admitting some bad news to another manager. "It's been a very hard week for me," he said. "I had to lay off 40 percent of my group."  And one engineer received lively applause when he told Ms. Fiorina during a question-and-answer session that "the thing that gets hit first" in the rush to meet the company's quarterly financial targets "are those new ideas." ... for many outside experts on corporate research it is still an open question whether Hewlett can rekindle the synergies it once enjoyed in computing and materials science research before 1999, when it spun off Agilent.."They took away what was really powerful about HP Labs," said Robert Buderi, an expert on corporate research laboratories. "They haven't gotten their edge back."   [JOHN MARKOFF,  New York Times, Apr 29]

[Technology] is an area where periods of great excitement are followed by disillusionment and lack of interest, and then excitement revives. Those cycles tend to last a long time - 10 or 15 years. In 1999 and 2000 we experienced the greatest excitement ever, with the dominance of technology in the marketplace far beyond its role in any past cycle. ... on the whole, technological change seems to be occurring faster, so reasons to become excited may re-appear faster than in the past. So, I would not abandon it altogether, but it may be some time before technology asserts itself as the leading edge of the market on an enduring basis. [T Rowe Price Report, Spring 03]  Even the bias toward optimism by mutual funds and timidity in forecasting cannot hide the pessimism that tech stocks are the quick ticket to a happy and prosperous future. Which helps explain why the SBIR companies that went public in the 90s are struggling for survival today. They are simply not earning the profits that justify frothy evaluations. 

Thinking Inside the Box. "'We're supposed to put public money into speculative investments that the private markets won't go near? Come on. Be serious.'', said Tom Finneran, then [a decade ago]  chairman of the Massachusetts House Ways and Means Committee. Today Finnerman wants to put $100M into such investments. ... If recent history teaches us anything, it is that a lack of investment capital is not our problem. In fact, the glut of capital was the gasoline that fueled the boom that created the bust. There is no lack of capital out there; there are hundreds of investment firms sitting on billions of dollars. ... There are plenty of places for government to help business and create jobs. Venture capital is not one of those places.  [Steve Bailey, Boston Globe, May 14]  

Molten Metal Redux?  Pressure cooking garbage to separate metals from carbon-based organics sounds great. But like all new, different, and exciting technologies, it's all in the cost. Not the fantasy costs you tell the government and the investors; the real costs that include overhead, government regulation, advertising, etc. Changing World Technologies, like Molten Metals, has a new way to cook garbage to turn it into something no longer dangerous or polluting. How long it survives before bankruptcy remains to be seen. [facts on CWT from Business Week, May 19] 

Less is More, Says Carly. HP CEO is scrambling to justify cutting the company's R&D efforts as she transforms HP to be a cheap computer company from being a champion of innovation.  And as she framed it here, a leaner and meaner research and development operation will not just preserve the Hewlett-Packard brand, it will also help extend it.  ... John Grebenkemper, a veteran engineer who came to Hewlett by way of Compaq and Tandem Computer, rehearsed his presentation for the research group, he could not help quietly admitting some bad news to another manager. "It's been a very hard week for me," he said. "I had to lay off 40 percent of my group."  [JOHN MARKOFF, New York Times, May 10]  Orwell would understand as HP adopts some of the White House "war is peace" approach. 

The study said technology thrives in states where education systems stress science and engineering, producing technologically sophisticated workers; where research programs regularly produce commercialized ideas, and where there is a history of entrepreneurs and the financial capacity to support technology startups. ... The study found the state lacking in its ability to sustain rapidly growing young firms, but had little data to understand why it was happening."Washington ranks sixth among our peers in terms of employment in smaller high-growth 'gazelle' firms and last among the peer states on the number (of) Inc 500 firms," the study said. ... "Good fortune is not a strategy," Myer said. "We need a strategy."  [Stephen Dunphy, Seattle Times, May 11]

Connect the Dots of the steps of IdeaLab people out of town as the dot.com wonder closes its New England operation that now houses only four companies. [Peter J. Howe, Boston Globe, 5/10/03]

[Gordon] Moore himself observes, “no exponential is forever.” Moore's law may be good for at least another decade, but eventually chips will get faster more slowly. ....  chip makers can no longer rely on the cheerful old principle of “Build it and they will come.”  That is unlikely to be a catastrophe for the industry. Instead, a bit less fixation on raw technology may bring benefits. It will give the industry space to concentrate on what increasingly matters to customers: not the speed of improvements in chips, but things such as the reliability and user-friendliness of computer systems. ...  Instead of stuffing more technology down its customers' throats, the IT industry must help them to use its wares to become more productive. That might be termed Google's law, after the popular web-search engine that owes much of its success to concentrating on its users. ...  there is still a long way to go. Unless the industry focuses less on Moore's law and more on Google's law, it will become a commodity business. For this, nobody will get standing ovations: not even Mr Moore.  [The Economist, May 10]

Losing the Chips. The U.S. semiconductor industry is on the brink of losing the race to continue producing more powerful, smaller and cheaper computer chips, a National Academies report said.  ... the report's authors said Asian and European governments are taking steps to lure more foreign chipmakers to their shores and to make their own companies more competitive.  The U.S. government, on the other hand, has no national policy for helping its industry remain dominant and in recent years has cut back funding for research and development into semiconductor designs, they said.   [Faith Bremner, Gannett News Service, May. 9, 031  Disaster, or the market at work?  That  depends on your attitude toward government intervention in technology (or any other) markets. Said Charles Wessner, NAS guru on technology R&D, The good news is, there's time to react and change the policy framework for the industry. That includes everything from tax incentives for research and development to education incentives for students. The bad news is, we risk ignoring the first rule of holes, which is to stop digging.  This debate raises the same question as the automobile debate, What is an American chip? Globalization makes every chip like every auto - a melange of national parts.

You've got an invention. You've got a patent. Big deal. Neither is enough to create a viable business, let alone a profitable one. That's the hard truth California attorneys Ardelle St. George and Don Carnegie try to explain when an eager inventor approaches them for help in applying for a patent. ... A business may be founded on an invention, but it also requires skilled management, financing, positioning in the marketplace, building a successful brand and more.  [Jan Norman, The Orange County Register, May 4]

Got Real Innovation for Public Good? The Open Source Applications Foundation posted some software code on the Internet and invited programmers around the world to offer suggestions and improvements. The posting was an early -- very early -- version of ``Chandler,'' the code name for an open-source personal information manager, e-mail and calendar program. The project and the foundation (www.osafoundation.org) are the brainchild of Mitch Kapor, and a talented group of other people who want to create a new, unfettered platform for innovation.  They hit another, less-noticed milestone at the end of March, when the Andrew W. Mellon Foundation (www.mellon.org) awarded the project a $98,000 grant. The money is being used to see if Chandler -- currently aimed at individuals and smaller businesses -- can work on a much larger scale, serving the needs of huge universities. The Mellon grant was, I hope, a harbinger of something much bigger. As we move into a Digital Age, it's essential that the foundation community recognize a crucial need: to keep tomorrow's information architecture as open, as free for all to use, as possible.  [Dan Gillmor, San Jose Mercury News, May 4] Note don't expect the government programs, like SBIR, to fund the public good for anything but advancement of the interests of the agency (or, more precisely, the interests of the deciders). Unfortunately, the real innovators who pay little attention to government interests won't know what those interests are. 

Philips Electronics once asked a group of people what color its new radio should be. Most said yellow. Then, when choosing one as their thank-you gift on the way out, they all passed over yellow radios to pick up silver ones. The only way to be certain customers want what you're planning to sell is to show them a working model, which can take lots of time and money to develop.  [Chris Charuhas, Tech Central Station, May 1]

In the atmosphere of cynicism and potential retribution that dominates the business landscape today, CEOs seem to want nothing more than a low profile. They are reluctant to undertake new and untested business initiatives, want no visible risk and are loathe to speak out on corporate governance matters. It's all very troubling: Risk-taking is essential to capitalism. Without it, the system can't function.  [STAN O'NEAL, Wall Street Journal, Apr 24] No visible risk is what the federal agencies seem to want in their SBIR awards, playing a golf course with a nine-iron. 

Bye, bye Boston  If you survived Massachusetts in the early 1990s, you know the story. What was a mild national recession was a depression here. It started in technology, but it didn't take long to roll into real estate and the banks. Nothing was spared, and before it was over we had lost 11.6 percent of all jobs in just four years. The result: Massachusetts's most important resource, our people, started heading for the exits, big time. And it is starting to happen again. Massachusetts residents are again leaving the state in scary numbers. Last fiscal year, according to US Census numbers, about 28,000 more people left Massachusetts than moved here, double the previous year and about the same as 1992, when the state was just beginning to recover from our worst economic quagmire in a half century.  [Steve Bailey, Boston Globe, 4/18/03]

Start-up's sensors keep tabs on bridges' health  During a December rush hour 35 years ago, a steel connector in a suspension bridge linking Ohio and West Virginia suddenly failed. Within minutes, the bridge had collapsed into the icy Ohio River, taking with it 31 cars. Forty-six people died. The collapse of the Silver River Bridge changed the way bridges are inspected in the United States. Today, each of the nation's 600,000 bridges gets an on-site checkup at least once every two years. Now, founders of a Waltham start-up company want to change the way bridges are inspected -- again. They're hoping it won't take a similar tragedy. But, unfortunately, tragedy often spurs rapid change, while start-ups peddling new technology have a harder time. Senera was founded last year and has only three full-time employees. ... Why not install wireless sensors on older, problem-prone bridges to get a continual stream of data about their condition? Senera proposes to affix sensors to a bridge, all wirelessly connected in what might be called a ''bridge area network.'' Senera's software would interpret the data coming from the bridge and present it to the customer -- a state highway department -- on a secure website. Senera's system would produce such an objective ranking of the various bridges that had been outfitted with sensors, Taylor says.  [Scott Kirsner,Wired and Fast Company magazines., Boston Globe, Apr 14]

The latest survey by the National Federation of Independent Business showed that managers, proprietors and assorted pooh-bahs of small firms haven't been so down in the mouth in a decade.  .... In like vein, the Business Roundtable, populated by corporate top dogs and fat cats (it's a nondiscrimatory group), reported last week that more than five times as many of its members expect to cut their payrolls as boost them, and, not unrelatedly, only a tad more than half expect sales will grow this year. ... As to a shot-in-the-arm from fiscal policy, he notes that Japan has tried that tack for 10 years and has nothing to show for it but a spectacularly swollen government debt, now weighing in at 150% of GDP.   [Alan Abelson, Barron's, April 14]

If small business can have subsidies like SBIR, why not steel companies?  The nation's top steel executives and the leader of the steelworkers' union urged members of a joint congressional caucus yesterday to support steel tariffs for two more years, despite the WTO ruling last month that the U.S. tariffs are illegal.  [Gus G. Sentementes, Baltimore Sun, Apr 9, 03] Oh yes. our subsidies are a must, theirs are optional.]

Still the Car of the Future.    The celebrated ride of the car that spawned the nation's toughest emissions regulation ends at a parking lot in Southern California, where a growing fleet of General Motors electric cars awaits an uncertain fate. Dozens of the green, metallic blue and bright red futuristic autos are lined up behind a chain-link fence at the edge of a freight-rail line in Van Nuys, a sure sign the world's largest automaker has pulled the plug on a vehicle it heralded as recently as two years ago as "the car of the future."  [Brian Melley, The Associated Press, Seattle Times, Apr 9]

With some exceptions, "war is the enemy of most useful innovation," says Joel Mokyr, an economic historian at Northwestern University. .... It's important to remember, though, that the positive effects of fiscal stimulus from higher defense spending last only a short while. Over time, higher spending on defense and security hurts growth and productivity. .... According to estimates by economists Samuel Kortum of University of Minnesota and Jonathan Eaton of Boston University, the U.S. gets 30% to 40% of its productivity-enhancing technology from other countries. The liquid-crystal displays. ..... says Paul Saffo, director of the Institute for the Future in Menlo Park, Calif. "If we pull in the welcome mat, we'll kill the technology industry."  [Michael Mandel, Business Week, Apr 14]  Perhaps the time has finally come ripe to call DOD to account for its innovation from SBIR. Even though DOD dodges any economic accounting, at least the Iraq war makes a test ground for DOD's claim that helping the mission was paramount. Let it now prove that its SBIR had a contribution greater than not having such a program at all. DOD actually would like to prove that SBIR was NOT worth the effort so it could end the administrative headache of a special program to do what it would have done anyway. Its challenge would be to prove to the politicians that it did its best and still came up short. It most likely course, though, is to avoid the question and continue to muddle through by fudging any acid tests. 

Innovation could suffer, too. Over the long term, growth depends on the willingness of companies and individuals to take risks on developing and implementing new technologies. If they are worried about factors beyond their control, they may opt for safety, and the rate of innovation could slow. One sign of that: the continued fall in venture-capital funding, which reflects not just weakness in the tech sector but uncertainty about the future.

American companies are putting capital-spending plans on hold because of the war with Iraq, possibly setting the stage for further economic weakness, a survey said. [PATRICK BARTA,  THE WALL STREET JOURNAL, Mar 21]

A long-term world of hurt'.  Silicon Valley's economy will face an uphill struggle this year, as it remains bogged down from the aftermath of the dot-com bust, according to a new forecast from the UCLA Anderson School. The barriers? Investment bubble, savings bust,  strong dollar, government budget deficits.  [David A. Sylvester, San Jose Mercury News, Mar 14]  The few SBIR companies who envision selling new technology to the info-tech world have a uphill struggle even after they sell the conservative government on the technical merits to get a tiny subsidy. 

Home Cooking, Child, Support and High Returns. The politicians want it all and would repeal economic laws to be everything to everybody. Washington's multibillion-dollar public-investment fund is considering changing its investment policy to funnel more money into the state's startup technology and biotech companies. The Washington State Investment Board, which manages $48B in investments mainly for public-employee retirement accounts, has crafted a policy that could allow it to favor home-state companies, so long as it doesn't sacrifice its duty to maximize investment returns.  [Luke Timmerman, Seattle Times, Mar 13]  

A well-known rule about doing business in technology is that nobody ever bet against Moore's law and won. .. Over the last 40 years, a score of brave and brilliant, but foolhardy, companies have tried to get ahead of the law: Trilogy Systems and MicroUnity with their superchips and IBM with X-ray lithography. All have failed, often spectacularly, losing billions of dollars in the process. [Michael Malone, The Red Herring, Feb03]  SBIR firms needn't worry the government won't put up enough money to get them in that deep, and probably would not put a dime into something that challenges Moore's Law. 

Got the perfect high-tech solution? OK, it's expensive. Hear Eric Schmidt, Google CEO:.  We aren't interested in getting maximum power for a high price. What we're looking for is maximum functionality and that's a whole different thing." Each of Google's thousands of motherboards (a computer's main circuit board) are designed for the quick switching of components. Even the power supply is held on with Velcro straps: if it burns out, it can be replaced quickly. Recently, when the expensive top-end disk drives used by the motherboards proved inadequate, Google tossed out thousands and replaced them with cheaper, better models. 

Sounds Great, Flunks Cost-Benefit.  Not too long ago, investors poured hundreds of millions of dollars into firms pursuing the promise of artificial skin. Wooed by its potential to revolutionize the treatment of patients with severe burns and wounds, they envisioned huge commercial opportunities. .... But the hopes for profits that the technology once inspired have been dashed. ... Industry executives and analysts say they overestimated the commercial opportunities, underestimated the challenges, and encountered some obstacles they couldn't possibly have foreseen. ... ''That's the problem with a lot of promising, young technologies,'' said Tim Surgenor, a biotech executive, ''No matter how hard you try, you can't always sort out the market ahead of time.''... ''It wasn't a sustainable business model,'' said William Plovanic, a medical technology analyst in First Albany,  ''In burn treatment, the market wasn't big enough. In wound care, the reimbursement wasn't there. That's two strikes against you, and those are two very big strikes.''  [Naomi Aoki, Boston Globe, 3/5/03]

Having spent most of my career on trading floors, my opinion is that government cna never keep pace with the innovation of the private sector.  [Pippa Malmgren, former WH economic policy wonk]

Red Ink Kills Red Herring. The Silicon Valley magazine magazine devoted to the New Economy will close after ten years of highlighting the technologies of the info-tech boom. Its ad page count dropped from 3,357 in 2000 to 404 last year as VC sponsored hot companies folded. [story by MATTHEW ROSE,  WALL STREET JOURNAL, Feb 28]

The world is plagued with a glut of capacity that has yet to work itself off. The system hasn't cleansed itself from the mania like excesses of the 90's. The delusion on part of Wall Street is that the only thing holding back investors and the new bull market is Iraq. Once we drop a few bombs it's back to party time again on Wall Street and the financial markets. P/E ratios of 50, price-to-book ratios of 4.8, price-to-sales ratios of 8 or more are ignored. Wall Street is living in a world of delusion and self-denial, wishing for days long past.  [Jerry Olson, Barron's On-Line, Mar 3,02]  The few SBIR awardees who hope to win big by selling info-tech stuff should take note that capital, and market interest, will be harder than ever to come by. 

Fast Company Founders to Halt.  Another victim of the bursting of the tech bubble is Fast Company magazine whose founders Alan M. Webber and William C. Taylor are resigning, the mag's future is up for grabs.  [story by D.C. Denison and Chris Reidy, Boston Globe,  2/25/03]

[Craig Barrett] sounded an optimistic note in his speech Tuesday, urging a room full of engineers to come up with new solutions to help drive the faltering high-tech economy. "There is pent-up demand (for technology) out there," Barrett said in his speech. "What's going to ignite that pent-up demand is innovation."  [Matthew Yi, SF Chronicle , Feb 19]

Red Herring Founder Unveils 'Super-Blog' for Business Geeks. With the whiff of Internet startups of yesteryear, Tony Perkins lays a bold claim to the ‘eBay-ization of media.’  ... AlwaysOn Network, he’s trying to take it to the next generation. AlwaysOn aims to completely rethink technology and business publishing.  [David Kirkpatrick, FORTUNE, February 11, 03]. 

Gordon Moore predicts that the semiconductor industry will maintain its torrid pace of development for at least another decade, regardless of normal fluctuations in the economy. ... Growth in the semiconductor industry, he said, would equal the growth in the world's gross domestic product by 2017 if the industry continues its scorching pace.  [Rachel Konrad,
The Associated Press]

for nearly 150 years, business in general, and big business in particular, has been the driving force in American history. It is the Hamlet of the play, without whom the drama has no clear shape or meaning. It has occupied center stage in the national pageant.  Other aspects of American life may be more interesting or exciting, but none rivals the role played by big business in shaping the way we live and the world in which we live. To visit even remote corners of the culture is eventually to stand in the presence or shadow of big business. Not by accident have Americans erected the largest, most formidable material civilization in history.  [M Klein, Coming Full Circle: The Study of Big Business since 1950, Enterprise and Society, Sep 2001]  What big business conservatism shuns is new ideas that change or invent an industry. That's where small firms, sometimes abetted even by a conservative government, find a niche and expand into big business space. But better science does not qualify as industry invention, only profit-seeking entrepreneuring. An ideal SBIR would seed all the budding ideas that came to the door since there is far more SBIR money than qualifying ideas. 

Tech companies and their investors are scratching their heads after President Bush introduced his economic stimulus plan Tuesday. They had hoped the Bush plan would help restart the industry, but now a painful realization is setting in: They got left behind.  [Eric Hellweg, LARTA, Jan 13] No matter, the administration will spin out a rationalization that justifies tax cuts for everyone who makes campaign contributions. 

Over the past three years, tech stocks have been steadily losing value as myths about technology companies' ability to grow and their invulnerability to downturns have been debunked. [K Brown and J Eisinger, Wall Street Journal, Jan 10, 03]

The Magic Has Cooled. trying to divine technology and spending trends, be careful which industry predictions you take to the bank. Vested interests and lofty aspirations lurk behind much of the technology industry's forecasting for 2003. Depending on whom you believe, the tech engine next year will run on embedded radios and semiconductors, Web services, self-provisioned broadband networks, all-in-one system management appliances or some other emerging technology solution.  many of the consultants and executives making those predictions happen to sell some version of their vision. But even when vested interests aren't at play, the industry is too willing to project its future in terms of niche, gee-whiz or immature technologies rather than focus on improvements to the core technologies that drive most companies..... tech vendors, in particular, must come to grips with the fact that their products no longer evoke wonderment [Rob Preston, Tech Web, Dec 15, 02]  

Overall conditions in high tech remain bleak, and employment continues to drop. Texas’ high-tech sector has lost 45,300 jobs since April 2001, about 11% of total high-tech employment. High-tech manufacturing jobs have declined 4.4% year-to-date. The outlook seems to be softer rather than firmer, according to industry contacts. Activity is not expected to improve in the next six months, and recovery in telecom won’t come until after 2003. Prospects for earnings growth are poor, keeping sales activity and equity prices in the cellar.  [Mine Yuecel and John Thompson, Southwest Economy, Dallas Federal Reserve, N/D02]

Bad news for those who believe the worst of the bear market is behind us. Investors, strategists, and fund managers overwhelmingly agree with you. .. When no one sees anything but blue skies for stocks, you can be sure the storms aren't over. [Chris Graja and Wm Hester, Bloomberg Personal Finance, Feb 02]

The entrepreneurial spirit of 2002 may be summed up in one sentence: "I can always get a job." That was one of many thoughts shared by a group of four entrepreneurs who sat down with The Seattle Times recently to explain how difficult it was to start a technology company in 2002. ... Q: So are you saying investors' standards have come down this year?  Noble: IPO has become a four-letter word.  Verschueren: I haven't been paid for two months, but the thing that keeps me awake at night is that we have a really neat technology and some patents pending, but we are growing really slow. My only hope is that there isn't a competitor that we don't know about sneaking up behind us.  [Tricia Duryee, Seattle Times, Jan 6]

If wishes were horsepower, California environmentalists would be riding in the cars of their dreams. Instead, they were mugged by physics. Batteries are still too heavy for electric vehicles to lug around. Gasoline in a tank stores vastly more energy in less weight and volume.  After a decade of spending billions of dollars for research and development, the auto industry's best electric cars had a driving range of 120 miles before needing a lengthy recharge. Enthusiasts claimed that was enough for most purposes, but drivers don't agree. [THOMAS G.  DONLAN,  Barron's, Jan 6]  When drivers don't agree, bet on politicians following them.  But the Energy and Transportation Departments in their R&D (including SBIR) will keep on slogging for better batteries in bite sizes improvements. Just go light on the grand pronouncements of how America will be saved by your contribution to the imminent adoption of electric vehicles. Rhe realists will not believe your claims. 

The room was far too small for the crowd. People were standing everywhere and sitting on the floor in the front along the sides to hear six leading economists opine on productivity and the new economy. Martin Baily, Martin Feldstein, Robert Gordon, Dale Jorgenson, Joe Steiglitz, and Larry Summers. Each had his own perspective on why the productivity jump 1995-2001 and where productivity was going. None said it would continue at 2.6% - the bubble number which owed a large debt to simply a larger output number. Gordon noted that until now, computer hardware development was driven by the need to keep up with the new software development. But now that hardware has caught up, there is no great need for faster bigger hardware  just to browse the Internet. 

So Long, Seattle. After two decades of nearly continuous growth, this year the Seattle area might see more people move out than move in, according to moving companies, relocation services and demographers move in, ... The dot-com crash and Boeing layoffs have left this region with one of the nation's highest jobless rates. [Bradley Meacham and Dave Woodfill,  Seattle Times, Jan 4]

 Semiconductor News Junkies, Awake. MIT is offering a new pub - a bi-monthly Semiconductor Innovation Letter - promising  insight into significant R&D developments in the chip industry as well as close-focus news and analysis of venture investment in private semiconductor companies. Get a FREE sample issue 

Hot Government R&D Growth, Cool Private.  U.S. companies expect their research-and-development spending to be flat again this year, as the falling stock market has weighed heavily on corporate budgets .... Companies plan a 0.1% increase in R&D spending for 2003, [say]  Battelle and R&D Magazine. [AMY MERRICK,  THE WALL STREET JOURNAL, Jan 2] 

REMEMBER the technological malaise that befell America in the late 1970s? Japan was busy snuffing out Pittsburgh's steel mills, driving Detroit off the road, and beginning its assault on Silicon Valley. Only a decade later, things were very different. Japanese industry was in retreat. An exhausted Soviet empire threw in the towel. Europe sat up and started investing heavily in America. Why the sudden reversal of fortunes? Across America, there had been a flowering of innovation unlike anything seen before. Possibly the most inspired piece of legislation to be enacted in America over the past half-century was the Bayh-Dole act of 1980. ... this unlocked all the inventions and discoveries that had been made in laboratories throughout the USA with the help of taxpayers' money. More than anything, this single policy measure helped to reverse America's precipitous slide into industrial irrelevance. ... A dollar's worth of academic invention or discovery requires upwards of $10,000 of private capital to bring to market. Far from getting a free lunch, companies that license ideas from universities wind up paying over 99% of the innovation's final cost.  [The Economist, Dec 14] 

-----------  Dateline 2003 ----------------------

The 2003 forecasts are in, and they're not pretty. Venture capitalists who were optimistic last year about an improving landscape in 2002 have long since recanted and are singing a much darker tune as they look ahead to the coming year. [Beth Healy, Boston Globe 12/30/02] Many industry observers predict that the industry's slumping revenue will finally turn around in 2003, though the growth should be modest. Forrester, the Cambridge-based research firm, projects technology spending will grow 5.6 percent over this year to $410 billion, barring any dramatic changes in the US economy. [Chris Gaither, Boston Globe, 12/30/02]

ViaSat will sell satellite modems and other equipment for a sweeping project to expand Internet access in Mexico. e-Mexico is a digital divide program that sees opening 3,200 digital community centers is a government project subject to the usual political maneuvering. ViaSat's VP claimed that  every site will be a school and every school will have a computer lab. Presidente Fox somehow sees that 4% of Mexicans using Internet will translate to 90%. Which would community rather have - a sewer of an Internet connection? Fox also expects private enterprise to pay for 90% of the project. [story from Mike Freeman, San Diego Union Tribune, Dec 24, 02]

Top Trends 2003 guessed by The Red Herring:
Wireless LANs; Virtualization; VC investments; security chips; nano-everything; expensed stock options; bankruptcies; biotech; digital radio; broadband. 

Companies must upgrade their computer systems - eventually. And while it won't be a 1990s-style tech-buying frenzy, many analysts are predicting a modest tech rebound to come in 2003, a sorely needed boost for a still-wheezing U.S. economy. ... Most - like Cincinnati Bell - will keep their spending level while trying to keep up with fast-paced upgrades and replace the last generation of systems they bought in the1990s.    [Amy Higgins, The Cincinnati Enquirer, Dec 21]

Gas, glass, and brass are so pre-millennium. LEDs are the lights of the digital age -  everywhere. ... In a few years, they'll illuminate automobile headlights, homes, and offices ...  The most advanced way to mix them: pulse-width modulation, which varies each diode's duty cycle. Boston-based Color Kinetics has a patent on this technique, which is the basis for its color-changing floodlights, spotlights, and night-lights. ... LEDs consume a fraction of the power of incandescents. ...  LEDs also throw off almost no heat and last longer. ... They're Cheap.  Each has a lifespan of 50,000 to 100,000 hours - 10 to 30 years. .... Predictions are that by 2006, they'll be cheaper than even supercheap fluorescents.  [Simson Garfinkel, Wired, Jan 03]

“The mountain ranges are stacked up one behind another,” said Paul Saffo, industry pundit and director of the Institute for the Future (Menlo Park), providing an image of the opportunities that lie ahead. “I think the unintended consequence of the dot-com bust is [that] we have created the largest generation of entrepreneurs this country has ever seen.”  But Saffo was equally quick to trot out an old joke to describe the angst of the investment community. “These days, venture capitalists sleep like babies: They sleep for two hours and then get up crying,” he quipped.  [Rick Merritt, 12/9/02, quoted by LARTA, Dec 17]

The Chips Are Down, Again.  the industry's flagship trade group, the Semiconductors Industry Association, is projecting average revenue growth of 8% to 10% in the years to come.
[five-star analyst Mark] FitzGerald thinks that chipmakers will continue to suffer in 2003. Intel, which long preached a philosophy of spending through the downturn, will probably trim capital spending in 2003 to $3.5 billion from $4.7 billion for 2002. ... Equally gloomy is FitzGerald's outlook for chip manufacturing equipment companies. Chipmakers are taking on two capital-intensive burdens at once: increasing the size of silicon wafers to 300 millimeters and decreasing the size of transistors on a chip. The cost of a new chip factory now runs about $3 billion. ... There are six companies that can afford to move to 300-millimeter wafers, FitzGerald says. Of those six, two are Taiwan. [Arik Hesseldahl, Forbes, 12.23.02]

Cash-strapped shoppers still may be buying this holiday season, but cagey technology insiders are definitely selling. We have benefited from a relief rally of sorts in tech, but one has to wonder how much leg it really has, w