Hear Hindery Roar: Tech Glut's Too Much

There are plenty of executives out there who will tell you a tech recovery is on the way, but Leo Hindery isn't one of them.

As CEO of YES, the network that George Steinbrenner set up to push cable TV operators for the right to televise New York Yankees baseball, Hindery might not seem the best-placed prognosticator on tech. But given his well-chronicled penchant for staying a step ahead of disaster, Hindery's semiannual assessment of tech, telecom and media tends to command attention from some financial trend spotters.

On Monday night, Hindery again delivered a sobering message. The nation's economy is threatened by a "pervasive overcapacity" in nearly every market, Hindery told a dinner hosted by securities firm Friedman Billings & Ramsey. And with few antidotes available to combat the tech and telecom glut, the 55-year-old executive says investors should prepare for more big, expensive failures.

Take communications gear, for instance, an industry in which a vast supply of equipment far outstrips feeble demand. Though the big players in the sector continue to struggle gamely to remake their floundering businesses, at the end of the day there's simply not enough money to keep staid old-line outfits afloat, Hindery warned.

"Nortel and Lucent fail," Hindery said of the struggling equipment makers. "They just disappear."

That said, the executive's pessimism isn't limited to information technology. Indeed, he sees problems that will continue to hamper the entire tech sector. While some observers are now willing to believe the two-year tech recession may be nearing an end, Hindery is focusing on ominous signs like an estimated $600 billion in outstanding telecom debt, and an unemployment rate closer to 7.1% if you include those jobless who have fallen off the official claims tally.

Hindery has headed up a variety of cable TV, undersea fiber and Net storage businesses over the past decade and a half, giving him an unusually broad perspective on the common problems afflicting a host of stumbling industries. That experience paid off for those who listened to him during the Internet boom, when he began saying many New Economy business models were doomed to fail.