Better tech may rise from economic ashes

It's not all doom and gloom in the tech world these days. Despite the economic downturn, a few rich companies with plenty of cash in the bank are looking to snag innovative startups, according to an article in USA Today.

Among those who can still play are Cisco Systems which has $29.5 billion in cash reserves. Microsoft, which laid-off 5,000 workers recently, is still planning to make some strategic hiring to fill new jobs supporting Internet search. Intel is also moving ahead. The company says it will spend $7 billion in the next two years to build advanced manufacturing facilities in the United States. The plants will be geared toward producing faster, smaller chips that consume less energy.

"If we want to see a return of American prosperity, we have no other choice than to invest in creating the future, not merely preserving the past," says Intel CEO Paul Otellini.

Still, as the recession wears on, tech analysts say consolidation is likely to remake some tech sectors. More layoffs could be on the way as companies alter strategies. Droves of startups, such as data-management provider Attune Systems, have pulled the plug on operations, while others have sold at fire-sale prices.

This new burst of energy may encourage new startups to rise from the ashes. Looking back in time, other down periods helped generate new companies. Cisco emerged from the 1987 market crash. Facebook and MySpace were born shortly after the dot-com crash.

"A good forest fire cleans out the prairie," says renowned venture capitalist Steve Jurvetson. Startups unburdened by debt or history and cash-rich big companies "thrive on disruption," he says.

For more on how bad times may ignite new products:
- check out this USA Today article

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