Risk Management

Bird Flu: Profitable or Problematic?

An epidemic might actually stimulate profits for some companies, provided that their supply chains are resilient enough.
John EdwardsMarch 13, 2006

At a business luncheon in Boston earlier this year, Dell Inc. chief executive officer Kevin Rollins ruffled a few feathers when he commented that a bird flu epidemic might actually stimulate profits for the computer maker. He observed that during the 2003 SARS (Severe Acute Respiratory Syndrome) virus outbreak in Asia, Dell’s direct-to-customer sales in the region increased because people were quarantined or stayed home. “We deliver to homes. People don’t have to come to stores,” said Rollins.

SARS also forced Dell to shutter its office in Taipei for a week, sidelining more than 100 of its own employees working in research, development, and procurement. Whether an outbreak of bird flu would ultimately help or hurt any particular tech vendor, retailer, or service provider hinges on several factors.

“It certainly would be the first pandemic of the information age,” says Ken McGee, a vice president and fellow at technology research firm Gartner. As soon as a pandemic became evident, businesses worldwide would likely react by asking as many employees as possible to work from home, suggests McGee, which “does have the potential to be very fruitful and profitable for a number of vendors.”

That situation would be a boon for computer makers like Dell and Hewlett-Packard, as well as retailers such as Wal-Mart and Circuit City, which deliver desktop and notebook computers and other tech wares directly to homes. Other possible pandemic beneficiaries would include collaboration technology vendors, wireless network manufacturers, broadband service providers, and cell-phone makers and carriers. “People will still need to remain in touch,” says Ken Hyers, an analyst at ABI Research. “Any company that provides a product or service that allows people to work independently could see its sales rise during an epidemic.”

On the other hand, a severe outbreak — for instance, if the virus mutated into one that can be passed from person to person — might well affect the workforces of many tech manufacturers, perhaps enough to prevent them from meeting any spike in demand for their products. Vendors who rely on the physical delivery of products would also likely face crumbling supply chains as the virus made its presence felt among the middlemen. A company’s ability to profit from an increased demand would depend on its production and sourcing locations, says Hyers, as well as the geography and severity of flu hotspots.

Another critical unknown: how the world’s residential broadband and cellular networks would fare during a pandemic, as workers shift activities from their offices to their homes.

“At this point, nobody really knows how things would play out during a pandemic,” says McGee. “The vital thing — for techs or any other business — is to think about things now, identify the most critical people in your company and get them primary, secondary, and maybe even tertiary services.”