Execs At Comdex: Economic Recovery Not Yet In Sight

Channel executives and analysts attending Comdex Fall expect a slow recovery at best, with the recession likely to linger well into 2003.

Carlos Bonilla, the special assistant to President Bush's National Economic Council, told several hundred Comdex attendees last week that recovery in the tech sector could lag behind the general economic recovery.

"To the extent that we have surplus capacity,that is to say to the degree that we overinvested in technology,then we have to expect tech sector growth to lag what it otherwise would have achieved," Bonilla said. "It is hard to come to any conclusion other than the straightforward acknowledgement that we overinvested in technology during the bubble of the 1990s."

Distribution executives agreed that for the first time their fortunes seemed tied to general economic conditions. "My concern is the economy in general and the rate of capital investment by American business and whether that's going to grow or shrink," said Tech Data Chairman and CEO Steve Raymund. "And that's pretty much a function of the economic outlook that's being driven in part by the geopolitical outlook. I've never worried about that before in our business."

Added Ingram Micro President and COO Mike Grainger: "The economy is the main problem, and it's very geographic-specific." While the United States and Western Europe remain question marks, growth potential in Asia and Eastern Europe provide a "ray of hope," Grainger said.

"The economy in Europe is the most important driving factor," agreed Lennart Svantesson, president and CEO of Scribona AB, a Solna, Sweden, distributor.

"But enterprise software remains very profitable for us. And there is a pent-up demand for notebooks."

For his part, Don Bell, chairman and CEO of Bell Microproducts, said he doesn't expect any pent-up demand to lead to a PC desktop refresh in the United States, which some analysts are starting to predict for next year.

"The quickest way for a CEO to get fired is to approve a major PC upgrade," he said.

But there are some bright spots on the horizon. Rich Raimondi, Hewlett-Packard vice president and general manager, U.S. commercial business, Imaging and Printing Group, said the vendor is not backing off its plan to grow its imaging business by 10 percent next year. Raimondi said HP's IPG business, the strongest in the company, is the one that most depends on the channel. Currently, 97 percent of IPG's worldwide business goes through the channel, he said. "We didn't get 70 percent [market share by ourselves," he said.