Shaking off 2001's malaise

Rebound: A recovery in the wake of last year's heavy layoffs is expected, perhaps in the second half, with an emphasis on joint ventures and experienced management.


January 20, 2002|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

From local companies Aether Systems Inc., Corvis Corp. and Ciena Corp. to New Jersey-based telecommunications giant Lucent Technologies Inc., 2001 brought no shortage of layoffs to the technology sector.

Experts are predicting that this year will be different.

"I would think that would be it," said Steven Cochrane, a senior economist at

John McCarthy of Forrester Research in Cambridge, Mass., agreed, saying, "For the most part, I think the [information technology] sector is going to gradually see recovery as we move through the course of the year."

Joint ventures

Experts expect a pickup to begin about the second half of the year. They predict a greater emphasis on joint ventures, a rebound in information security and investments in technology companies with experienced management.

"I think the days of very young people being able to get a company funded have already been numbered and gone," said Newt Fowler, head of the technology group at the Baltimore-based law firm Venable, Baetjer and Howard.

So have the days of overblown salaries.

"The tight labor market is gone, and the inflated salaries are gone," said Chris Brown, director of business development for Glows in the Dark Studios, a Baltimore Internet company that is expecting to hire workers this year.

Information security was a hot sector last year, and it has become even more of a growth area since the terrorist attacks Sept. 11, Fowler said. The Baltimore region, he said, is well positioned to take advantage of that growth with companies such as SafeNet Inc., an Internet security business in White Marsh, and Netta Systems LLC, an information security company in Howard County's high-tech incubator.

Wireless technologies and optics will continue to face challenges this year, Fowler said. The bigger companies in that market, such as Nokia Oyj, the No. 1 maker of cellular phones, are suffering, casting a pall on the smaller companies in the sector, he said.

Aether, an Owings Mills-based wireless communications company, laid off 250 employees in the spring and announced plans in October to lay off 280 more.

The field of optics faces a different set of problems. Great and meaningful technologies are being invented in optics, Fowler said, but the market has yet to catch up with the science.

Problems in optics

The question in optics is whether capital will be sufficient to support those companies until the market matures.

Trellis Photonics Ltd. moved its headquarters from Israel to Howard County in 2000. But the company, which developed an all-optical switching device, said in July that it was closing the U.S. office because of a slowdown in the industry. The company then put on hold indefinitely its plan to build an $18 million manufacturing plant in Columbia.

"The sector will win over time," Fowler said, "but it will be a sector that struggles a little bit next year."

Lucent cut tens of thousands of jobs last year. Corvis, a Columbia-based maker of telecommunications equipment, laid off 300 employees, about a quarter of its work force, in November, days after its local competitor, Ciena of Linthicum, laid off 380 workers, about 10 percent of its work force.

Mark Lutkowitz, an analyst for Charlottesville, Va.-based Communications Industry Researchers, said the optical market is still relatively healthy despite a current downturn in the growth.

"This is not an industry that's going to go down the drain. You've got to kind of temper it on the upside and the downside," Lutkowitz said.

Fiber-optic networks will evolve, but it won't happen overnight, he said. Telecommunication companies will build on the networks they have, using optics and electricity to shoot data along the information superhighway.

"It's evolutionary, not revolutionary," Lutkowitz said. "You don't go to whole new paradigms overnight."

Cochrane of said that side of technology - the side that makes the routers and telecommunications equipment that keep the Internet running - won't be the first to see a turnaround.

Corporate demand for computers is likely to bounce back first as companies find it's time to replace the computers they bought a few years ago in anticipation of the turn of the century, he said. That will fuel a demand for the equipment, such as semiconductors, that goes into computers.

Equipment that enables the Internet will follow later, Cochrane said. "It really might be 2003 before we see a turnaround on that side of technology," he said.

Penny Lewandowski, executive director of the Greater Baltimore Technology Council, said she expects more collaboration among businesses in the community this year. More companies will become partners with universities or other businesses, she said.

"I think we're going to see more mergers," Lewandowski said. "I think there's still some shakeout to come, and that's happening everywhere."

Lewandowski thinks the diversity of the technology companies in the Baltimore region means they are likely to swing back faster from tough times.

Pleasant surprise

Baltimore Internet company e.magination Network LLC, for instance, said September was its worst month in history because of the slow economy and the terrorist attacks. But to the surprise of the company's chief executive officer Brian Ocheltree, e.magination recovered. The fourth quarter being its best in the company's history.

Now, with the dot-com shakeout behind it and a few good months under its belt, e.magination is expecting this year to be a success.

"We're going to hit the ground running because we're coming off our best quarter ever," Ocheltree said. "We have a lot less competition than we did."

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