Tech chiefs fear Europe slowdown

The future of the economy looks bleak for tech companies

Technology chiefs gathering at CeBIT 2001 in Hanover are less than optimistic about the prospects for the global economy.

Carly Fiorina, chief executive of computer maker Hewlett-Packard, set the tone during her opening speech when she said that the technology slowdown in the US was spreading to Europe.

"This slowdown in the US economy is now clearly spreading to other parts of the world," Ms Fiorina said at CeBIT, the world's largest annual computer trade fair.

Carly Fiorina: "This slowdown in the US economy is now clearly spreading"

"Candidly, I am not optimistic about Europe's immunity from slowdown," she added.

"Nor am I optimistic about a quick recovery in the second half of 2001, as some were speculating about earlier in this year."

She was joined by Ericsson's deputy chief executive Torbjorn Nilsson, who said growth in the telecom market in the US would be in single digits or flat this year.

By contrast, the market grew at 20-30% in 2000, he said.

Nothing new

Such dejection comes as no surprise. Over the last few weeks, a slew of technology and telecom companies on both sides of the Atlantic have released profits warnings, or announced job cuts.

At this point we are not assuming any improvements throughout the remainder of our fiscal year

Carly Fiorina
Hewlett-Packard

Ericsson itself warned earlier this month that it faces a heavy loss in the first quarter because of the US economic slowdown.

Alcatel and Siemens, the European telecoms equipment and mobile phone makers, have also predicted slower sales growth in 2001.

Even Finland's Nokia, the world's largest mobile phone maker, has forecast sales growth of 25-30% in the first quarter of 2001, compared with previous expectations of 25-35%. And Hewlett-Packard saw a 15% rate of annual growth slip to just 2% during its recent first quarter.

Central bank

"At this point we are not assuming any improvements throughout the remainder of our fiscal year," added Ms Fiorina on Wednesday.

However, her comments that Europe is set to suffer on the same scale as the US will enhance fears that continent is on the brink of a sharp slowdown.

Certainly pressure is growing on the European Central Bank and the Bank of England to cut interest rates in order to insulate European economies against slower conditions.

But despite this, not everyone sees Europe as the next target for an economic slowdown.

Some hope

The struggling US telecom equipment manufacturer Lucent Technologies used CeBIT to announce a string of deals with European telephone companies.

The fibre optic company has turned to Europe in the hope of capitalising on what it said are the biggest growth industries - mobile, internet technology and broadband services.

In the US, Lucent has cuts its forecast of how much customers will spend on telecom equipment this year from $300bn to between $250bn and $275bn.

"We all know the market is growing at a slower rate," said Ben Verwaayen, vice chairman. "Specifically, the world's large service providers have reduced the pace at which they are building their infrastructure," he said.

Among the tie-ups Lucent announced on Wednesday, is a deal to provide Deutsche Telekom with optical equipment for its European network.