Sweet and Sour: Asian Currency Chaos Roils U.S. Tech Firms, But It Isn't All Bad --- Production in the Region Will Become Cheaper; Sales Will Take a Hit --- Here Come Lower-Priced PCs
For giant disk-drive maker Seagate Technology Inc., there has been no shortage of ripple effects from the economic crises coursing through Asia. The hard part has been figuring out whether the news is bad or good.</br></br>Consider: In October, the world's biggest drive maker took a $63 million charge because of a badly timed hedging bet on the plunging currencies of Thailand and Malaysia, where Seagate has many of its plants. While the charge was a shock for shareholders, there was also an upside: The currency declines that triggered it also meant lower manufacturing costs for Seagate, the biggest private employer in those two countries.</br></br>That bit of good news, though, was quickly offset by bad news in South Korea, where a weakening won gave Seagate's competitors like Samsung Group the chance to cut their prices. Panic time? Not so fast. Because of the same South Korean crisis, the likes of Samsung are facing a credit crunch that appears likely to curb their ability to expand operations. That's potentially a big plus for Seagate, because the company is struggling with an industrywide glut of disk drives. But a scarcity of credit is also bad news, of course, since consumers and corporations in South Korea and the rest of Asia will be buying fewer personal computers, in which most of Seagate's drives are used.</br></br>Confused? Join the crowd.</br></br>U.S. investors are clearly alarmed about the fate of America's highflying high-technology multinationals, and are threatening to stampede out of the sector. The tech-laden Nasdaq Stock Market has sunk nearly 5% this week. Such behavior isn't completely irrational, because the net effect of the Asian turmoil is bound to be negative, at least in the short term. Japan and the Asia-Pacific region, excluding China, represent about a quarter of the global economy, and their collective growth rate may go from robust to nil next year. More than a third of America's $150 billion of high-tech exports go to the region, and the sales of the units of U.S. companies located there dwarf those exports.