US tech business thrives despite the economic gloom

Look at chip giant Intel. In two weeks, it spent US$9.1 billion snapping up software security firm McAfee and the wireless business of German chipmaker Infineon Technologies.

And Hewlett-Packard (HP) trumped Dell in a takeover battle over little-known data storage firm 3Par last week.

Their bold moves to bulk up their businesses seem out of step with the gloom and doom over a possible second recession infecting Wall Street and Main Street. It certainly flies in the face of conventional wisdom that a firm should trim its sails as it confronts the headwinds from a possible slowdown in demand for its goods and services.

But these tech firms are sparing no expense to cement their leadership positions, even as the rest of the world is sitting on huge swathes of cash, paralyzed by fear that the sky is about to fall.

It also suggests that investors may be missing the boat on the next big wave of new-technology investment.

Some clues can be found in the way the last such wave crashed over the investing world. Go back to 1997-1998 when Asia was confronted with a financial crisis that sent numerous banks and businesses belly-up. But while investors here were staring at crippling losses in their investment portfolios as stock markets dived across the region, there was a huge technological transformation taking place that changed our lives forever.

This was the Internet, which came of age in 1997 when tens of millions of people across the globe started signing up for e-mail accounts at Yahoo, Hotmail and AOL. As Internet usage heated up, business people realized that there were huge money-making opportunities being created.

This revolution coincided with a surge of liquidity in the global financial system as the U.S. Federal Reserve cut interest rates to combat the Asian financial crisis and the Y2K bug, which threatened to paralyze computers as the year 2000 neared.

The end result was the dot.com boom, a period when Internet start-ups were the rage in stock markets and vast fortunes were made as investors snapped up their shares at outrageous valuations.

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