The impacts of a steep decline in technology stocks
"Requiem for a Cheerleader: Silicon Alley Magazine is dead," New York Times, October 8, 2001.
In 1999, a high-tech magazine took a portrait of a group of executives in the computer industry, whose combined net worth was then around $30 to $40 billion. In year 2001, their net worth was slashed by tenfold to $3 to $4 billion due to the precipitous decline in computer stocks. Most of these former executives quit their jobs or dissolved their companies for financial reasons. One former executive became an apple grower; another works for a non-profit, charitable organization.
However, the casualties of the collapse of high-tech stocks reach far beyond the loss in stock values for these former executives. For example, at the zenith of the computer industry in 1999, there were 8,500 companies with 250,000 employees engaged solely in the publication of magazines related to the computer and other high-tech industries. At that time, these magazines were expected to grow 40% per year in the future. The largest such magazine was Silicon Alley Reporter, the fate of which closely parallels the growth of the computer industry. In 1996, the magazine started with a 16-page, simple photocopy format. Soon, the publication grew to a 250-page, highly glossy magazine with hundreds of employees. The focus of the magazine was to report mainly on the current and future unprecedented successes of the computer industry. Yet in 2000, as the value of computer stocks started to decline sharply and computer-related advertisements became scarce, the magazine grew thinner and thinner until it became a 64-page publication with only 14 employees. Finally, the publisher decided to fold the company, because, as the publisher stated, "you can't have a magazine about unemployed people."
This is one example of a collateral failure caused by the failure of a related industry.