The upheaval facing the technology and Internet sectors is now having an impact in this economy. The collapse of e-business firm, Ebeon, in which Eircom is the majority shareholder, is the first high-profile closure of an Internet firm here. But it will not be the last. This time last year, Internet companies were raising money without difficulty, even though many had little prospect of early profitabilty. Now the wheel has turned full circle and the dot.com world is facing a shake-out.
The wider technology sector is also facing a slowdown. The latest evidence came yesterday when Dell, which employs 5,700 people in the Republic, announced that its profits for the fourth quarter of last year will be less than expected. Fortunately, this does not appear likely to affect employment in its Irish operations - in the short term at least. Another pc maker, Gateway, is to lay off around 10 per cent of its 1,600 Irish staff.
The dot.com mania of 1999 and early 2000 created a bubble which had to burst. Financial markets were putting extraordinary valuations on companies moving into a new area where no-one was quite sure when - or even how - profits would be made.
The move to liquidate Ebeon was not the only recent evidence of difficulty in the sector. A number of other Internet firms have announced redundancies and some traditional companies - such as fruit company Fyffes - have been forced to reassess their investment in that area. Also NTL, the cable company, has announced a delay in its plans to make digital television services available to its customers in the Republic, slowing the spread of technology which will make the Internet more widely available.
The difficulties facing some of the big technology companies are part of the same general picture. Demand for personal computers and other equipment is not rising as rapidly as expected. However, it is important to realise that growth in this sector is still continuing. The companies involved are not making losses - they are just not making as much profit as they had expected.
The pessimism should not be overdone. There is no doubt that the Internet is a powerful tool which will continue to revolutionise the way businesses interact and the way they deal with their customers. And no one is forecasting the death of the personal computer nor are there many really worrying signs about the major technology companies based here. They may, however, be facing slower growth than heretofore.
A sharp slowdown in the US economy is still a possibility and this would have serious implications for the technology sector and its investments here. For many companies whose business is purely based around the Internet, the environment is already very difficult. But the Irish economy has a wide and diversified information technology sector. Activity in this sector will continue to be a major contributor to growth, but its progress over the next year or so is likely to be a good deal slower than it has been.