War has little effect on tech industry

CNet

Ed Frauenheim

Companies and analysts say the war in Iraq is not likely to hurt the technology sector in the short run and may help it. But they caution that extended geopolitical tensions could harm the industry. The U.S. military campaign that began Wednesday evening has not disrupted sales or operations at computer chip giant Intel, company spokesman Chuck Mulloy said Thursday. "There's been no impact on us so far," he said. "We are watching the situation very carefully."

Like many large technology companies, Intel has operations scattered across the globe, including two chipmaking factories as well as research and development facilities in Israel. Mulloy said the company has contingency plans to keep employees and facilities safe and to keep supply lines working.

The start of the war also has not harmed computing titan IBM, said company spokeswoman Theo Chisholm. "The activity doesn't pose an immediate threat to IBM employees or business operations," she said. "We do very little business in the Middle East."

The war's nonimpact on IBM and Intel is typical for the technology industry as a whole, suggested French Caldwell, an analyst with technology market research firm Gartner. The conflict "really doesn't have a tremendous direct effect on the technology industry immediately," he said.

Caldwell said a quick U.S. victory may improve the global business climate, which in turn could spark companies to invest in new information technology about 18 months from now.

John Gantz, chief research officer of research firm IDC, also envisioned the war helping tech companies. "It clears away the uncertainty," he said. "It will allow end-users to get on with their lives and eventually buy more computers."

But Caldwell, a retired military planner, warned that geopolitical tensions could continue even if Saddam Hussein falls quickly. "The aftermath is very uncertain," he said. "There's a whole series of what-ifs."

The conflict began after the collapse of months of diplomacy regarding Iraq's disarmament. On Monday, President Bush ended talks through the United Nations and gave Hussein 48 hours to leave Iraq.

The U.S. began limited bombing Wednesday evening. On Thursday, Iraq fired missiles into Kuwait and U.S. troops entered Iraq. Although some analysts have predicted a quick war, the conflict has raised fears that Hussein may spark a wider Middle East conflict by attacking Israel and that terrorists around the globe may step up their activities.

Israel is home to many technology operations. Mulloy said the war in Iraq hasn't upset Intel's business in Israel, which has experienced numerous suicide bombings in the past few years. Most Intel employees there are Israeli citizens, Mulloy added. "They're used to these kinds of events."

Greg Dvorken, spokesman for computer maker Sony, acknowledged that the war could lead to changes in shipping routes or higher freight charges, which could affect shipments of Sony's components or finished products. "If the conflict extended outside of Iraq, there could be an impact on distribution," he said.

Tech investors on Thursday were banking on a positive outcome of the war; both the tech-heavy Nasdaq composite index and CNET's Tech Index were up in late trading. In a research note Thursday, Salomon Smith Barney analyst Tobias Levkovich suggested lower energy prices made certain tech companies, such as Dell Computer and National Semiconductor, good investments.

Gartner's Caldwell said a continued period of tension or a prolonged war would slow down the business of sending IT work overseas, because companies would worry about the reliability of the service.

U.S. companies with partnerships overseas may see those relationships strained, Caldwell added, partly because of political rifts stemming from the Iraq situation. "A lot of multinational partnerships are going to be really tested here," he said.

International communications, though, shouldn't be a problem even if travel is curtailed, said Shelagh Lester-Smith, spokeswoman for wireless technology company Motorola. She said the economic slump of the past few years already has made companies more willing to conduct business remotely through technologies such as Web conferencing. "We're all much better connected than we used to be," she said. "That's a benefit in circumstances like this."

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