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The Odd Economic Downturn
by Paul McGoldrick
Last week – the week of February 22, 2009 – was one of my favorites of each year, personally getting to those winners that I can, to hand out Product of the Year Awards for 2008. This year the Awards had been chosen by January 8 – our process doesn’t depend on reader input, there are no essays to be written by the vendors. No, our Editors put their necks on the line, as we do with every week’s product reviews, and call it as we see it. And I have never been into a company where they said, “We don’t understand why you think we deserve this – why are you here?”
A case in point was at the first Award meeting, on Monday morning. A large room was full of people, a long banner proclaiming the Award was hanging on the wall, and there was a huge cake with both the company and EN-Genius logos on it. Terrific! These people cared about their Award. It was, and I hope continues to be, a major morale booster for the employees.
At most stops the designer(s) were also around to be a part of their well-deserved Awards, and the one visit that stands out the most for me was to a company where a young female designer's product – a truly novel architecture for a part that will make a lot of money – was not only one of our winners but her first major project. She has one heck of a career ahead of her.
With one exception (where things were rather disorganized), everybody was all smiles, well prepared for the visit, appreciative of the Award and the personal presentation, and even late on the Friday afternoon all the employees of my last stop squeezed into their boardroom to be a part of the occasion. Despite this last visit being to a company that will only start shipping product this year, they have an extremely bright future, and the Award confirms – from an outside view of the action – that they are doing things right. What better frame of mind to be in at the start of a weekend?
Although it was a joyous trip there were negatives all around me. Another couple of small layoffs; people on forced vacation; pay reductions; travel restrictions; media downturns; no donuts! No company seemed to be exempt from the current economic woes.
True, I heard from one executive that his division of a large company was showing an improvement in bookings for the second quarter. And at another there was a shipping number given to me (yes, companies do tell me such things) that clearly indicated that the low-end cell phone business was not hurting. But they were exceptions.
This is one heck of a weird downturn. In Silicon Valley there seems to be no let-up in traffic, restaurants are full, and I didn’t see a single foreclosure sign – although I am sure they are certainly out there. There are plenty of abandoned building projects, however, with the wilderness and rust growing around and in them.
Why the continuing overall business-as-usual look in the Valley?
It was put to me that the general population of the Valley is fairly well-heeled and that the rest of the country’s troubles were not being fully reflected in daily life as a result. Maybe. Or maybe it is because that although we think of 40% downturns as being devastating, they are far less significant than seeming near 100% downturns in the vehicle business, or catastrophic falls in home values over much of the country. The layoffs our industry has suffered are minor compared to the hundreds of thousands of jobs that have been lost in other industries.
It has also been pointed out to me that the last downturn, in 2001, was very much a technology burnout, making its impact on Silicon Valley much more apparent. This time around it is a global meltdown.
And, of course, most of the companies in our sector are substantial and require little financing to survive; so, even with Wall Street ripping stock prices apart, the cash being held will keep those companies afloat. Indeed, a couple are hiring people today, which will put them in a much stronger position when this ends. As it will.
There is one exception to the financial strength of our electronics manufacturers, and that company is carrying around $2 billion in debt on its books. There are already rumors of a lot more layoffs coming from that direction – as early as March.
I hope that when the time comes to deliver Product of the Year Awards for 2009 that not just the Awards will be welcome news, but that the economy will once again be giving more of us reason to smile.
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