PC, Internet Woes Deepen

In this winter of discontent, an economic freeze is putting the hard bite on personal computer sales and Internet specialty companies. Reluctant shoppers held a tight grip on their wallets this holiday season. How long the slump will last is anybody's guess.

Deep discounts for personal computers abounded during the peak purchasing season, but that didn't produce a dramatic spur in sales. Predictions are that price wars will break out early in the new year in attempt to clear a glut of perishable PC inventory.

"I would have to believe there's going to be a brutal war" in the first quarter of 2001, said Peter Christy, a research director for Internet technology at Jupiter Media Metrix, in an interview with Reuters. "If you have volumes in the pipe you need to get rid of them before they rot underneath you."


The big question facing the information technology companies is "Why?" What went wrong so fast? The conventional answers include: a lack of compelling new computer products this holiday season; a saturated market with PCs that are "good enough" for what most people use them for; fear of a looming economic recession; and on and on and on ... .

After 24 years of carrying the digital revolution, the PC has matured into something that's now boring – a product that's already owned by nearly everyone that wants one, says Walter Mossberg, technology critic at the Wall Street Journal.

Mossberg's prediction is that we're in a new digital transition, one that will eventually be dominated by "a new wave of cheaper and friendlier digital appliances." But, he notes, those appliances are still being defined and not yet ready for primetime.

"The grotesque hype that has always been part of the PC and Internet industries, and which helped create the technology bubble in the first place, makes it as hard to judge the current slump as it did the earlier surge," says Mossberg. "Neither the PC nor the Internet, important as they are, was ever as fabulous or earth-shattering as their boosters claimed. And their current downturn isn't the end of digital innovation, either."


The PC sales slump comes simultaneously with a meltdown in the dot-com ventures that were driving engines of last year's Internet gold rush. December marked the seventh straight month of Internet-related job cuts, reports the job-placement firm Challenger, Gray and Christmas Inc. The month saw layoffs increase 19 percent from November's record number.

In 2000, a total of 41,515 positions were cut from 496 Internet-related companies, Challenger reported. Internet service companies such as consulting, financial and information providers were the hardest hit, followed by retailing dot-coms.

In the world of information technology, it's beginning to look as if the year 2000 was the time reality caught up with the hype. The personal computer, probably the most complex and unreliable high-tech product ever sold to consumers, appears to have hit a wall of user-resistance. Ditto for the Internet, which shifted from its original promise of an empowering, democratic interactive communications medium to an ad-glutted, electronic strip mall.

Yet, with the recent industry gloom and doom, there is some good news for people who use computers and the Internet. An energetic drive is now underway that promises to supplant the conventional PC with a new generation of simpler digital devices that do popular computing tasks in a far better, more reliable way. Those devices are not here yet, but it's clear the momentum has shifted in a new direction that will make computing more accessible and friendly to nontechnical users.


Hopefully, the same will be true for the Internet. Huge opportunities await those who help Net users reduce commercial clutter, eliminate e-mail spam and protect personal privacy. There's no reason the Internet can't live up to its original promise of a decentralized communications medium dominated by no one and free of monopolistic corporate control.

The booming gold rush days may be over. But, that's not necessarily bad news. Possibly, just possibly, saner information technology is just ahead.

Frank Beacham

Frank Beacham is an independent writer based in New York.