TECHNOLOGY

Some see reason to believe there's light, albeit faint, at the end of the tunnel

By Ross Kerber, Globe Staff, 5/20/2003

Biggest technology cos. All the charts

ALTHAM -- As the former chief executive of Lau Defense Systems LLC, Andrew Davis attends many morning business meetings searching for job leads and business opportunities, though he's been unemployed for 10 months now.

But there's some good news, Davis said at one recent gathering of the New England Executive Resources Council. When the trade group's discussion turned to the outlook for the state's technology industries, Davis noted that at least "the free breakfasts are getting better."

The remark summed up the conventional wisdom both in the room and among some parts of the hardware, software, and services segments of the technology sector.

All have suffered from the downturn in technology spending. Executives at several companies say they don't expect the situation to worsen in the coming year and are beginning to see glimmers of an uptick in business -- but only small signs, even though technology stocks have inched back up since April.

For instance, Avid Technology Inc. of Tewksbury has seen its shares rise to more than $28 this month from around $10 a share last October as it introduced new video-editing products used by movie and television studios. Also, shares in data-storage maker EMC Corp. of Hopkinton were trading around $10 earlier this month, up from $6.35 on Jan. 2.

EMC says it is focusing on keeping costs low. At the end of March it had about 17,200 employees including about 6,700 in Massachusetts, versus total employment of 19,200 a year ago including about 7,400 in the state at the time. EMC chief executive Joseph Tucci expects just a slight uptick in overall spending and vowed to improve the company's fortunes mainly by becoming more competitive. Aside from acquisitions, in the current environment "the only way to grow is to take share back" from competitors, Tucci said after EMC reported a first-quarter profit.

But if EMC seems to be coming through a difficult period, other one-time technology stalwarts are still dealing with the downturn. CMGI of Andover says it is expects to report an operating loss of as much as $4 million for the three months that ended April 30, far less than the operating loss of $54.5 million it had for the same period a year earlier, partly from a new focus on helping other companies improve supply-chain operations. The bad news: CMGI had previously aimed to reach the break-even point for the just-ended quarter.

Job figures reflect the difficulties. In 2000, 3,310 information-technology companies in Massachusetts employed 164,007 workers, according to a survey by the Massachusetts Software and Internet Council, the Boston-based trade group. But by 2002, the industry had declined to 3,079 companies with 135,277 workers. Joyce Plotkin, the group's president, estimates the declines may have ended this year but said she doesn't have hard data yet.

"The overall feeling is that companies have cut everything they can cut without losing their mission-critical teams," Plotkin said. "I think the sense is, they've done the cutting and now they have to invest in growth, and there's some cause for optimism on that side," she said.

The state's large defense industry provides a rare area for optimism, though the 26,446 people it employed as of late 2001 is about half of the number of jobs counted a decade ago by the Massachusetts Technology Collaborative, a quasi-public economic development agency in Westborough. Pentagon figures show defense spending in Massachusetts will rise to $9.24 billion in 2007 from $8.18 billion in 2002, with the lion's share going to large contractors such as Raytheon Co. in Lexington and General Dynamics Corp.'s facilities in Taunton and Needham.

These companies are focused on software and information-technology systems for weapons systems, rather than traditional blue-collar production jobs.

But their growth won't be enough to offset weaknesses in the rest of the state's technology sector, said Jeffrey Tarter, editor of Softletter, a Dedham-based trade publication. He worries that a growing share of New England technology jobs relate to sales and marketing work that could easily be moved to other states.

On the other hand, many of the venture-capitalists and law firms who specialized in technology during the boom of the 1990s remain to help new start-ups. "We still have the technology infrastructure," Tarter said.

Ross Kerber can be reached at kerber@globe.com.

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