“He who dares, wins.” – Motto, British SAS (special forces)

RESEARCH TRIANGLE PARK — A friend of mine (B.A. Goodsport) called the other day to say he had just discovered a new disease.

“It’s called CFOitis,” he said.

Knowing B.A. is not a big fan of chief financial officers (especially those whose idol is Scrooge), I couldn’t wait for the explanation.

“I was heading down the sidewalk, watching very carefully for any cracks that might trip me up, and I knocked myself out by walking into a tree limb.”

“So what does that have to do with CFOs?” I asked.

“Well, you know CFOS. They are so focused on the next quarter and cutting costs that they don’t see the bigger threats or opportunities a little farther down the road. I nearly knocked myself out because I was so afraid I might stumble.

“Now what’s worse- trip and skin a knee, or bean yourself, fall down and suffer a concussion?”

James Glassman, writing in The Wall Street Journal last week, put CFOitis another way. But he puts the blame of CEOs.

Easy days are gone

“Profits won’t be easy any more,” he wrote. “CEOs who think they can succeed by simply cutting costs will soon learn differently in an era whose motto will be, ‘Invest, innovate, or die.'”

Forecasts for tech-sector spending indicate a bit of a rebound is coming in 2003. And the stock market has rallied substantially from recent lows.

But where are the signs of life?

Do you see many?

It’s cut-cut-cut.

Who is to blame? There is plenty to share. And no one can blame CEOs for being gun-shy these days, post-Enron. They need help, too.

Interesting statistics

According to TrendMacrolytics, LLC, as reported by BusinessWeek, all the cuts in IT and telecom have not helped earnings. In fact, compared to the peak of the bubble and tech boom years, earnings have plunged through the floor, the basement, and are headed for the earth’s core.

For the 12 months ending December 2000, which TrendMacrolytics defines as the boom peak for IT firms, earnings hit $78 billion.

Through November 2002, IT earnings for the previous 12 months were $31 billion.

That’s a drop of 60 percent.

Telecom earnings hit a peak of $34 billion for the 12 months ending in March 2000. In the most recent 12 months, earnings nose-dived to $21 billion.

That’s a $38 percent plunge.

Those sectors aren’t alone. Earning is energy (48 percent), materials (47 percent), utilities (7 percent), industrials (7 percent) and consumer discretionary (10 percent) sectors have all dropped.

Those showing improvement were health care (32 percent), financial services (6 percent) and consumer staples (nearly 5 percent).

So what are the tech and telecom sectors and venture capitalists who provide oxygen for the startups in those sectors supposed to do?

Cisco and Red Hat are on record as seeking more productivity and increased gross profit margins on what they do sell. Some startup firms continue to generate venture capital investment, especially in biotech (which fits nicely with increased health care spending and growing baby boomer demand for better drugs, better quality of life).

But Glassman, a fellow at the American Enterprise Institute and host of techcentralstation.com, argues that CEOs must be aggressive and fight for growth, not be conservative and struggle to survive.

Overall, corporate profits have dropped 27 percent, he said, and therein lines the problem — not plunging prices on the Street. He cites a number of problems for corporations plus pricing power — from more free trade and competition to the Internet and deregulation.

“Those developments are good for consumers and the economy, but not good for individual businesses — especially those stuck in their ways,” he wrote. “Many are responding by trimming operating costs. That’s fine. But businesses have also cut back on capital expenditures — a mistake.”

Lead dog?

The boom-time easy profits are gone, but high profit margins haven’t been abolished, he said. Companies that innovate and lead may have a shorter period of time in market dominance, he added, but they still lead.

What would you rather be — the lead dog on the sled or the ones in smelly trail?

Glassman called for more entrepreneurship, capital investment and risk taking.

What the tech sector needs is the return of the men and women who are willing to be leaders and innovators — not CEOs and CFOs with noses so stuck to the ground that the never see the disaster or opportunity just on the other side of the hill.

They need help, too. They need board members who are willing to take the long view. And they need stockholders who understand the need for long-term investment, not short-term gain. (They also need to stay honest. Sarbanes-Oxley is there as a threat.)

In other words, everyone needs to keep an eye on the horizon at the risk of taking a tumble once in a while.

Rick Smith is managing editor of Local Tech Wire.