The industry has been asleep at the wheel. More than a year after the U.S. economy officially slid into recession, high-tech companies are suddenly discovering they're not immune to the now-global downturn.
It boggles the mind: The industry that successfully stretched beyond computing to penetrate, develop and market applications for the consumer electronics, communications, data networking, industrial and medical fields--all key segments of today's economy--is stunned to be affected by economic vagaries (see story, page 16).
In the fourth quarter, revenues at most electronics companies plummeted by double-digit percentage points, an unwelcome development for an industry known for strong closings to every year. Most amazingly, many of the companies reporting financial results expressed surprise at the speed and severity of the decline in customer orders for the final quarter.
Many provided quarterly updates halfway into the period but revised their guidance weeks later, citing a sudden and sharp deterioration of demand. Industry executives said customers slammed the brakes on all but the most necessary orders midway through the quarter.
Why was anyone surprised by this development? And why did the industry continue building inventory in the third quarter in anticipation of a blowout finish to the year?