The tech sector passed two poignant market anniversaries this week on its way to what investors and vendors hope will be a sustainable recovery from the recession and, in the best-case scenario, another boom cycle.
Wednesday was the 10-year anniversary of the Nasdaq's highest point and Tuesday marked one year after its lowest point since the dot-com bust.
On March 10, 2000, the Nasdaq -- darling of the "new economy" because of the myriad IT bellwether and dot-com companies listed on the exchange -- closed at 5048. The index then dropped until the middle of 2002, declining almost 4,000 points.
After its precipitous descent, the Nasdaq never fully recovered. The closest the Nasdaq came to 5000 in the past decade was on October 31, 2007, when it reached 2859. Sixteen months later, on March 9, 2009, recession-slammed tech companies led a broad market decline that saw indexes sinking to levels they had not reached in years. The Nasdaq fell to 1268, its lowest close since October 2002, near the bottom of the dot-com bust.
Examining the different scenarios behind those milestones, however, should offer hope to anyone whose fortunes are connected to the technology sector.
The Nasdaq high point came at the end of a boom cycle in the tech market, marked by the release of SAP's R3 ERP (enterprise resource planning) suite in 2002. The next eight years saw massive corporate take-up of technology including ERP systems, servers, and networking equipment like routers, notes Forrester analyst Andrew Bartels.
"Our analysis has shown that the tech market goes through eight-year cycles; eight years of boom followed by eight years of, not bust, but slower growth," Bartels said.
Amplifying the normal eight-year boom cycle at the end of the '90s was the massive outlay of capital on Y2K bug fixes in big corporations.
