Software Still King Of High Tech

Two major studies examining different phenomena - venture capital and high-tech employment - reached similar conclusions that the software industry is booming, but communications and electronics manufacturing are in decline.
Two major studies examining different phenomena--venture capital and high tech employment--reached similar conclusions: The software industry is booming, but communications and electronics manufacturing are in decline.

The report by the American Electronics Association examined employment patterns. The PricewaterhouseCoopers/Thomson Venture Economics/National Venture Capital Association Money Tree Survey studied venture capital. Both were released Tuesday.

The MoneyTree Survey found that 198 software industry companies raised $1.1 billion in the first quarter of 2005, representing the largest single industry category. Total VC investments for the quarter totaled $4.6 billion and, although that figure was down slightly from previous periods, it was in line with historical norms.

"We're seeing a natural ebb and flow in the level of investing," said Tracy Lefteroff, global managing partner of PricewaterhouseCoopers' VC practice, in a statement. "This quarter, the breadth of investing in industry segments and in companies at varying stages of maturity indicates a healthy balance between short- and long-term opportunities."

The MoneyTree Survey revealed that IT Services hit a two-year high mark of $302 million invested boosted by a single large deal. Emily Mendell, director of public affairs for the venture capital association, said Datran Media Corp. received $60 million in individual financing.

In overall financing, the security category received $247 million in VC investments, while the business and office software sector received some $208 million.

Telecommunications continued its slide, as 58 companies in the area received $371 million, dropping below its average in the past two years.

The $4.63 billion invested in venture capital in the first quarter represented a 7.9 percent drop from the $5.03 billion invested in the same quarter the previous year.

The American Electronics Association study, which looked at the employment situation on a state-by-state basis, said that slightly more than 30,000 jobs were added in the software services industry in 2004. The AEA saw a silver lining in the statistics that showed a marginal loss of 25,000 high-tech jobs in the total employment figure of 5.6 million.

"The good news is that the technology industry looks to have turned a corner," said AEA president and CEO William T. Archey in a statement. "For the first time since 2000, both software services and engineering and tech services added jobs. Each of these tech sectors added over 30,000 net new jobs to the economy in 2004."

The AEA examined "cyberstates" and found that most of them had been losing jobs at a high rate--612,000 high tech jobs were lost in 2002, and 333,000 in 2003.

The study found that the Boston area, often referred to as the "cradle of electronics and computing," lost more than 18,000 tech jobs in 2003, contributing toward its drop off the list of top five high-tech states.

Virginia moved into the fifth place position, which had been occupied by Massachusetts, now sixth. California is in the top spot.

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