Most commentators believe it is only a matter of time before the technology sector sees a sustainable revival of interest. The problem for investors is they will have to tear up the road map that served them well until the once-hot sector began its bone-jarring slide in March last year. It might now be the end of a technology cycle, one based on the personal computer, said David Williams, director of global venture banking at Merrill Lynch. Previous cycles were centred on mainframe computers in the 1960s, minicomputers in the 1970s and 'supercomputers' in the 1980s. Each new cycle saw the emergence of a new crop of leading firms and the disappearance of top dogs of the previous cycles. There was no reason to believe it would be different this time around, Mr Williams said, so it might be a mistake to simply buy up the old technology favourites now that they looked dirt cheap compared with a year ago. 'Some of the best returns come if you identify that next curve correctly,' Silicon Valley-based Mr Williams said. 'Where we see the next cycle coming is in areas like [data] storage. That is why you are seeing some relatively healthy valuations for the private storage companies even after the downturn in the public markets. A lot of VCs (venture capital firms) see that as the next wave.' While that may not sound particularly sexy, there is some logic to it. Companies like EMC Corp, Brocade Communications Systems and their yet-to-be listed peers which supply data storage systems can actually profit out of the mess the telecommunications industry has spent itself into. 'All this overcapacity you have in communications means that price wars have hit both on the service side and the equipment side,' Mr Williams said. 'The price of bandwidth is dropping a lot. That makes it easier for companies to transmit data and use larger applications. Because of that their storage needs go up. 'Where there is a loser, there is a winner, and that's the storage companies.' Communications equipment maker Cisco Systems, the darling of global technology investors in the late 1990s, has a comparatively poor short-term outlook. Mr Williams obviously believes it will not be one of the companies disappearing in the next cycle as he said he bought it at the end of last month, with its cheap valuation compelling. While demand is rising, supply of telecommunications capacity has been built way ahead of it. The industry will have to wait for demand to catch up, helped perhaps by new applications the availability of cheap bandwidth is likely to spawn. With firms like Cisco it was either feast or famine as telecommunications operators tended to spend money in US$100 million chunks or not at all. That overcapacity means famine rather than feast for now. 'I'm not concerned long term but I agree in the short term it is an awful situation,' Mr Williams said. In contrast, storage companies such as EMC could take relatively small orders from existing corporate customers. New demand was on the horizon from peer-to-peer networking which allowed workers to access each other's databases without the need to be routed through a central server. Microsoft Corp might also be able to emerge from the rumble of this technology cycle with its fundamentals relatively intact. 'They have an extraordinary history of leaping into new markets even if they don't necessarily innovate,' Mr Williams said. 'They are often the No 2 person but they bring so much clout and power when they come in you can't count them out.' Microsoft, which lives or dies on the strength of its programming talent, might also be helped by the rout of the dotcom firms. 'Whereas two years ago if you were a hot young programmer you wanted to work for a start-up. Now if you are a hot young programmer, Microsoft looks pretty darn good,' Mr Williams said. Spotting new trends in technology is an important part of Mr Williams' new role at Merrill, a company he returns to after a stint at venture capital firm Draper Fisher Jurvetson. After taking a back seat to Goldman Sachs and Morgan Stanley in the lucrative business of taking technology firms public, Merrill is playing catch-up. Mr Williams and his colleagues in the venture banking unit have a brief to forge long-term relationships with leading venture capital firms and promising start-ups. That way, Merrill hopes to have two feet in the door when the start-up decides to go public and chooses a lead bookrunner. 'We want to make sure that in that next upturn, whenever it comes, we are one of the top investment banks in the sector.' There are some interesting technology companies in Asia, which Mr Williams covers but 'for the population base out here it is still a fraction of what it should be. That will change but it is going to take a while'. There were bright spots dotted across the region. They ranged from engineers who had emerged from chaebols in South Korea to set up software companies serving the mobile phone industry to entrepreneurs 'with some neat ideas' graduating from the China operation of networking giant JDS Uniphase Corp.