Dot.com boom believers sober up

All the latest figures may be pointing towards continued economic growth of around 6 per cent, but one corner of the Irish market - technology - is already feeling the pinch.

For several years, technology, the biggest booming sector of the booming economy, was a happy party of venture capital and steep growth curves, funding luxury cars, high-end houses, pricey electronic gear, boozy lunches and all the techno CDs an upmarket geek could cram on the gold card.

Now, after high-profile job losses and company closures in the Republic, a new sobriety has emerged. With the severe tech shakedown in the US threatening further knock-on effects here, narrowing job opportunities and the prospect of more lay-offs, the flexible friend is no longer getting the same workout.

"I would have been eating out about two nights a week," said one former director of a technology company that folded in recent months. "I also would have been buying a house this year, and also a car."

He could take a high-paying job, but prefers to begin from scratch with another technology start-up. That means his finances are basically static for the next 12 to 18 months, he said. His situation - and that of others in similar circumstances - must be having an impact on the economy.

The removal of their spending from the consumer sector is already showing up in national economic figures, said Danny McCoy, economist with the Economic and Social Research Institute (ESRI) in Dublin.

The Republic is still in a wealthy phase with the same low interest rates, high growth, and Government tax breaks on offer as last year, but consumer figures have fallen.

"Why aren't people just replacing that 00-reg with a 01reg car?" he asked. "Clearly, the economy has had a jolt and the job market isn't as bright, spurring consumers to tighten belts."

He also noted that the employee share option schemes prevalent in the technology sector gave rise to "wealth effects" during the '90s tech boom. People had the sense that they had the cash that the paper shares represented, and thus, were willing "to bid up house prices in the more salubrious parts of the market".

But now, many of those shares don't even hold value as wallpaper, and estate agents say the downturn in the technology sector has removed many bidders from the high end of the market.

"They say the downturn in prices is almost entirely attributable to the downturn in technology," confirmed Paraic O'Toole, Irish managing director of consultants Cambridge Technology Partners in Dublin.

"If you look at the general signs, you see that guys are postponing relatively discretionary purchases, such as houses and cars."

He also said that job recruitment firms which focused on information technology positions are hard hit because they now have too many candidates and not enough jobs.

Technology firms see this as one of the upsides of the downturn. For Cambridge, the recruitment nightmare has eased. "We went from a stage where we were really knocking on doors to get people, and then paying a huge bounty for them, to a situation where the company is flooded with CVs," he said.

"If you want to see the reality of the tech downturn, just have a quick look at the recruitment pages of The Irish Times," said one technology publication director. He points to technology publications such as Red Her- ring in the US, now a thin sliver of its former self. "Ad revenue from technology companies has vastly reduced."

For many of the younger workers in the market, it must seem as if their whole, formerly rosy, world of good job prospects and large salaries has evaporated overnight. "I think it's tough on people in their 20s who have never experienced a recession," said Mr O'Toole.

"The options economy is really gone, and the way you relate to the finest things in life takes a nosedive," half-joked Mark Mulhern, a 20-something director of Dublin text-messaging start-up, Rtn2Sndr. Having started their careers in the midst of the boom, many graduates his age thought the good times must be a permanent way of life: "We all really believed it - that was the problem."