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Mounting Evidence of Turnaround for US High-Tech Industry - 2002-06-01

U.S. high technology stocks, those listed on the Nasdaq stock market, still show little sign of recovery two years after the market peaked and then fell precipitously. VOA's Barry Wood has recently been in the Silicon Valley outside San Francisco where many of the best known technology companies are based. He reports that even though dozens of dot com firms have gone out of business and share prices of the survivors remain depressed, there is mounting evidence that the worst of the downturn is over.

The semi-conductor industry has been registering increased orders in recent weeks. That is good news for companies like Intel and Advanced Micro Devices, leading employers in the Silicon Valley. Other companies like Cisco and Apple are cautiously optimistic about future earnings.

It has been a tough time for investors in high-tech companies. The share prices of many dot com firms, those dealing with the internet, are down from 60 to 90 percent from their peaks of February, 2000. While share prices have stabilized for many firms, there has been no real recovery yet.

Larry Magid, a technology analyst and writer in Palo Alto, believes the worst of the two-year-long slump may be over. The high-tech industry, he says, may be on the verge of some type of renaissance. "But it will be much different. First of all, companies will have real business plans with proprietary technology," he says. "Second of all, they will have realistic expectations. They will pay realistic salaries. Nobody will be getting six-figure incomes just because they have a cool idea. I just think it is going to be a slow climb."

Mr. Magid characterizes the late 1990s as a time of excess where corporate executives and investors had inflated ideas of the revolutionary impact of the internet and its capacity to transform people's lives.

David Callaway, executive editor of CBS Market, a provider of financial information over the internet, believes the internet is a transforming technology. He too believes the worst is over. "Remember what burst was an asset bubble. It was a bubble of stock prices. It was a bubble of investor demand, of investor expectation for the promise of this [internet] medium. That is what burst. The medium itself did not burst. We lost a lot of good ideas from companies that went bankrupt. But people are still coming to the medium. More people are coming to the internet to buy things now than were coming at the height of the bubble. The medium itself is still being used and is very much in demand. And it is going to grow. But the get-rich-quick schemes are gone. And people have to re-evaluate how companies are going to make money on the internet and value them a little more fairly," he says.

The shares of Mr. Callaway's own company, Market Watch dot com, are down 80 percent from their high of two years ago. On Wall Street, pessimism is still present. Analysts say even at these much reduced prices, the price to earnings ratio of most dot com and high-tech companies are still way too high. Those analysts think tech prices could go even lower.