Lean times linger for valley firms (RECOVERY A MIRAGE, THEY `FIGHT FOR EVERY PENNY')

San Jose Mercury News ^ | Thu, Dec. 09, 2004 | Chris O'Brien

[nickcarraway]

Silicon Valley expected to be enjoying good times by now. Instead, almost four years after the downturn in technology spending began, high-tech companies still find themselves clawing for any sale they can get.

Savvy corporations are playing desperate technology vendors against one another, extracting deep discounts for the latest equipment and services -- a far cry from the boom years when customers had to pay premium prices for backlogged products.

[LS]

Um, clue: that's how competitive capitalism works. You do NOT have captive markets, and do have to "fight for every penny." Ask Carnegie or Rockefeller. Carnegie constantly cut costs. "Watch the costs," he said, and the "profits will take care of themselves."

The tech/computing industry is going through exactly what autos went through in 1900-1910, when hundreds of car companies were shrunk down to a couple of dozen. Ford's own company went broke, twice, during that time, before finally getting on firm footing.

Americans have the best designers and computer brains in the world, and the best entrepreneurs: we cannot match cheap labor from India, nor should we try. As has been the case for 200 years, we need to continually move to the design, high-end products and let the low-labor countries have the low-profit, low-end mfg. This was what Isaac Singer did when he created the largest sewing machine manufacturing plant in the world . . . in SCOTLAND . . . while his own American facilities continued to refine and innovate. Same was true with Rockefeller, who bought cheap Russian oil and "farmed out" the production of oil so that he could concentrate on the refining and sales here.