The crisis in the technology sector shows little sign of abating. Lay-offs and cutbacks at the Irish headquarters of US-based multinationals are becoming commonplace, while many indigenous companies are retrenching, or even being forced to close. It is all a far cry from the heady optimism of 1999 and early 2000, when extraordinary valuations were put on technology companies and multinationals here were scrambling to attract new staff.
Despite this, however, it is vital to recognise that the technology industry remains a crucial contributor to the economy. Continued investment in key areas - by both the public and private sectors - is essential to lay the foundations for future growth.
Among the major multinationals, Intel this week announced a big profits fall, Gateway confirmed job reductions here, while Swedish mobile company, Ericsson, and US company, Hewlett Packard, both announced global cutbacks, which may affect their Irish operations. Meanwhile, British cable assembly company, Volex, blamed the downturn in the international telecommunications market for its decision to lay off 150 of its 800 employees in Castlebar, Co Mayo. Nor has the indigenous technology sector escaped the fall-out. There have been a succession of closures and cutbacks, some involving companies which were never going to make money, but others hitting businesses which had appeared solid. Just yesterday Enba, a leading Internet banking group based in Dublin, announced that it was abandoning a proposed merger of its First-e subsidiary with a Spanish company, while Trinity Technology announced that it was closing.
It is vital, in assessing the implications of these trends, that we do not overstate what is happening. The technology sector experienced an extraordinary bubble in 1999 and early last year. That bubble has now well and truly burst. Stockmarket valuations have collapsed. Financiers who were falling over themselves to pour money into anything with a dot.com will not now spend a penny on the sector.
Despite this, the sector will remain central to the economy. The risk now is that having been burnt, many banks and venture capitalists are withdrawing from the market - possibly driving some good companies out of business. And larger firms are turning their back on dot.com investments, often under pressure from their investors. It is important that those running businesses and investing in the sector take the long-term view. The wider technology sector will remain a key part of our economy, while the Internet and digital media are bound to be an increasingly important tool for many businesses.
For this reason, it is essential that businesses continue to invest prudently in this area and that financiers continue to support them. And it is also vital that the State continues to invest in the infrastructure for development in areas such as education, research and development and the provision of a broadband infrastructure across the State.