The debacle on Wall Street will tighten the belt for a maturing electronics industry in three ways. It will cool a hot beta market once hungry for its latest high end computer and communications gear, it will tighten a source of financing that has helped companies soldier through tough times and it will create a difficult economic climate that will color all its activities.
These effects come at a time when the electronics industry is maturing, managing all costs closely as it learns to live with growth rates increasingly measured in single digits. In the short term, the belt will only get tighter.
Wall Street's investment banks, once the "masters of the universe," are disappearing or morphing into more conservative commercial banks to survive the fallout from their over-aggressive investments in the poorly capitalized housing market. The result will be fewer, more conservative operations less willing to push the envelope with data centers that try to compute arbitrage opportunities to the nanosecond.
The tech industry has become accustomed to testing out some of its fastest computers, networks and storage devices on Wall Street—and relying on a significant business from the sector. That business will not disappear, but it will shrink dramatically.
Wall Street has been an aggressive financier for tech companies. In boom times it drove public offerings to frothy heights. A recent Associated Press article detailed its role as a quiet but important source of funds in tough times as well, noting a $1.5 billion loan Lehman Brothers made to Advanced Micro Devices to help it write down debt from its acquisition of ATI Technologies.
IPO opportunities have been muted for awhile. But with the investments banks essentially gone or restructured, the tech industry needs to get used to the fact that for the foreseeable future its highs will not reach their past peaks and the lows will be bumpier.
As Wall Street's earthquake ripples out to Main Street, times will be a bit tougher all around. A significantly raised ceiling for national debt threatens to raise taxes and interest rates for everyone, dampening growth prospects for all markets and initiatives.
The good news for the electronics industry in the current mess is that it has done a better than average job of going global. While the U.S. economy licks its wounds, high tech can turn more of its attention to markets and financial resources in Asia and the rest of the world. The temblor in Manhattan will be a more distant rumble there.
The bad news is concerns the U.S. is losing its technology leadership will grow and likely become more real. The already lukewarm will to increase funds for basic research and education—the engines of the high tech economy—likely will cool even more for a nation with a large debt to service for ongoing wars and financial mismanagement.