For tech firms, recovery but no '90s replay

The good times are starting to roll again in the chastened technology business. But so far the party is more restrained than the Internet carnival of the late 1990s, and not everyone has been invited.

After three lean years and several false starts, tech companies are seeing a jump in orders for computer hardware and software, while employees are fielding job offers. Earnings and stock prices are on the rebound. And economists say a technology turnaround is finally at hand, even in beaten-down Massachusetts, which is lagging the nation as a whole but now may be poised to catch up.

"Here's a surprise: A programmer who worked for us just took a job at another company," said Paul Egerman, chairman and chief executive at eScription Corp., a Needham firm that makes speech recognition software for doctors. "That hasn't happened in years."

Yet this recovery is taking a different shape than past ones, when the high-tech industry was an engine of economic activity, jobs, and excitement. This time there is no single product or technology, such as desktop PCs or the Internet, around which business is coalescing.

In fact, some technology sectors are bouncing back strongly while others are still sluggish. Most companies are spending money and boosting payrolls only grudgingly. And many industry veterans doubt that the flat-out exuberance of the 1990s boom will return to the business.

One key test of whether technology can recapture the cachet that has eluded it in the post-bubble era will be this spring's initial public offering of Internet search engine company Google Inc. If the IPO takes off, as the seminal Netscape offering did in 1995, many think it could rekindle enthusiasm and perk up a lackluster recovery.

For now, the recovery is being seen mostly in replacement orders for computer hardware, software, and related services, as well as sales of a new generation of consumer products. Other sectors, from networking and telecommmunications to data processing and Internet services, remain weaker. And with global competition intensifying, it could prove more difficult than in the past for vendors to make money.

"This recovery is more spotty," said Mark Zandi, chief economist of West Chester, Pa., consulting firm Economy.com. "Compared to what we saw in the 1990s, when every market was hot, it's not as broad-based. Computer hardware and software is strong, but telecom won't kick in for another year. And it's going to be a bit hard to see growth in the ISPs, the portals, and the data processing area."

Still, the signs of recovery are everywhere. The tech-heavy Nasdaq surged 50 percent last year, recrossing the 2,000 threshold after a two-year hiatus. As of Friday, the 14 technology companies posting fourth-quarter earnings -- including such bellwethers as Intel Corp. and IBM Corp. -- were up an average of 54 percent from the prior year, according to the research firm Thomson First Call.

Research firm Gartner Inc. reported worldwide personal computer shipments rose 10.9 percent to 168.9 million units in 2003. Some companies have resumed hiring, with data storage provider EMC Corp. of Hopkinton adding several hundred jobs, including more than 100 in Massachusetts.

And after three years in the doldrums, the IPO market is picking up. Five technology companies were among the 25 issues priced in December -- the highest one-month total since October 2000, the investment bank America's Growth Capital reported.

Consumers kept spending through the trough, and now are being rewarded with a crop of new products, from the Apple iPod digital music player to the Hewlett-Packard iPAC multimedia devices, that marry computing with entertainment.

"Some of the pain of the last few years got companies focused on how to create value for customers," said Arun Inam, a managing director at Mercer Management Consulting and a partner at Signal Lake Ventures in Boston.

On the business spending front, Cathy E. Minehan, president of the Federal Reserve Bank of Boston, told the annual meeting of the Massachusetts Software Council last week that the capital spending drought has ended. Several council members indicated they have seen new orders or expressions of interest from would-be buyers.

Stephen Turcotte, founder and president of Backbone Media Inc., a Waltham company that provides search engine marketing services, said he has fielded nine requests for proposals in January after getting just two or three a month for most of last year.

But the slower-than-expected pace of hiring has cast a shadow over the recovery, especially in Massachusetts. Largely because of its reliance on technology, the state has lost 5.5 percent of its jobs since January 2001, compared to a 1.8 percent loss nationally. Some of the state's high-tech sectors, like communications equipment, lost half of their jobs. And while the nation has seen steady if modest job growth in recent months, Massachusetts job growth has been uneven.

"Massachusetts has done considerably worse than the national average because we happen to be concentrated in the industries that got battered," said Yolanda Kodrzycki, assistant vice president and economist at the Boston Fed. She nonetheless said she thinks the state's economy and its technology businesses will pick up this year. And as the recovery gains momentum, Kodrzycki said, job creation here should be more in line with the rest of the country.

One measure of caution is the outsourcing of programming and other technology jobs to countries such as India and Russia. The trend is often cited as a means of cutting costs. But it's also a way to hedge bets for companies not yet convinced of an enduring recovery. "The economy is still shaky, so a lot of companies look to us," said Slav Lerner, client relationship director for Auriga Inc., an Amherst, N.H., company that links US companies up with Russian programmers. "It's easier to cut jobs if things slow down because they're not family."

The more sober mood and less frenzied investment climate are cited by many in the industry as hallmarks of the new tech era.

"Will we see the 1990s again?" asked Bob Davis, partner at the Lexington venture capital firm Highland Capital Partners and former president of Lycos Inc. "We won't see that kind of exuberance again in the next couple of decades."

Robert Weisman can be reached at weisman@globe.com.