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Will Silicon Valley ever get its mojo back?

By Alorie Gilbert, CNet, 20 January, 2003 09:10

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silicon valley mojo, silicon valley's mojo

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Will Silicon Valley -- mired in a post-boom crisis of confidence -- ever regain its status as an economic powerhouse and its place at the center of the high-tech universe? That was the central question pondered by a panel of leading technology executives, gathered in San Jose, California, on Friday for the annual Outlook Conference of the Bay Area Council, a regional business association. "We're all wondering if this economic engine called the San Francisco Bay Area will again be a centre of growth and innovation," said Yogen Dalal, managing partner at venture capital firm Mayfield. The panellists, among them Charles Hoffman, chief executive of broadband services company Covad Communications; and Judy Estrin, chief executive of networking technology developer Packet Design, were tentatively optimistic on the matter. The general consensus was that Silicon Valley would make a comeback some day but that the next several years would be slow going. The heady days of the Internet boom, all agreed, are not about to be repeated anytime soon. The overarching advice they offered to several hundred entrepreneurs, venture capitalists and business leaders in the audience? "Have patience," Estrin said. "We need to build the right foundation for future growth, not a quick fix that takes us two steps back." Some in Silicon Valley are in denial about how long it will take to come out of the downturn, noted Estrin, who sits on the boards of Sun Microsystems, Walt Disney and FedEx. She was also previously chief technology officer at Cisco Systems. "Let's all accept where we are," Estrin said. "Some forces in the Valley seem to think the next boom is coming any day." The good news To ease any hand-wringing, the panelists offered their views on promising areas for future growth. They were most hopeful about the future of broadband Internet service, wireless computing and communication, voice-over IP, advances in computer networking and data center technology, computer security, embedded computers and the Linux operating system. Yet many big challenges face the Silicon Valley economy and the technology industry in general in the coming years. The panelists agreed that the computing and communications markets are maturing and consolidating, meaning that the volatile growth of the boom may not return for a very long time. Other problems include unresolved questions around the protection of intellectual property, which are tying up advances in digital media and entertainment. Telecommunications companies are still dealing with bankruptcy, network overcapacity and regulatory uncertainties. A trend toward outsourcing technology jobs and operations to Asia is also a fundamental change reshaping the Bay Area. And last but not least is lingering fear and distrust as a result of numerous American business scandals and the dot-com crash. Estrin said anger and panic over those crises are creating "bad behaviors" that could dampen future innovation. "The relationship between venture capitalist and entrepreneur has shifted from being a team to being adversarial. We have to move back to working like teams," Estrin said. Later in the discussion, panel moderator Michael Malone, an ABC News.com author and columnist, put the panel's lone venture capitalist in the hot seat. Noting how few investments VCs made last year, Malone playfully asked Dalal what VCs in the Silicon Valley have been up to lately "besides improving their handicap and shooting hoops." In response, Dalal made a scorched-earth analogy to the devastating wildfires that have swept through Yellowstone National Park. "A lot of people looked at the burnt redwoods, wondering whether they would come crashing down or survive, instead of looking at the new flowers springing up from the ground," Dalal said. "That's where we are in the cycle."
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