By Lisa Fickenscher
Crain's New York Business

For the past six months, Rich Person has been commuting from his home in Massachusetts, where his wife and son live, to his job in Manhattan as the chief executive of an online advertising company.

It's not because he needs the money-three previous buyouts have left Mr. Person with a sizable financial cushion. Rather, he believes the company he works for, Poindexter Systems Inc., is poised for tremendous growth, and he wants to be a part of it.

Such optimism from a tech executive would have been nearly unheard of a year ago. But after a nearly three-year-long slump, the tech industry in New York is finally beginning to show some spunk.

A few key sectors are exhibiting some signs of strength, which is in turn encouraging investors to unlock their cash. Lawyers involved in tech deals are getting more calls, and recruiters are seeing some action as well. All of this activity is pointing to a possible rebound next year.

The evidence is mostly anecdotal so far. Signs of a recovery aren't showing up yet in the New York area statistics, though many industry watchers believe the tech industry has nowhere to go but up.

"We sort of hit bottom and are bouncing off," says Marc Goloven, senior regional economist at J.P. Morgan Chase. The pace of job losses in New York's tech sector has slowed, after staying at about 2,000 jobs per month for the past year.

Industry watchers are cautiously optimistic. Another broad economic downturn would certainly hurt the tech industry's chances. But in New York, three key sectors are showing signs of life: online advertising, financial services software and e-commerce.

The companies that are doing well in those sectors are a hardy bunch, having weathered both the bubble and the burst. Many of them offer a service or software that reduces clients' costs or makes them more efficient. Some are reporting record revenues in the third quarter, and others expect to be profitable for the first time early next year.

Online ad firms appear to be benefiting in part from companies' smaller ad budgets. A Manhattan-based research firm, eMarketer Inc., estimates that online advertising spending will rise next year to $6.7 billion, up from $6.38 billion this year, in part because traditional marketers are devoting larger slices of their ad budgets to online advertising.

Companies that would be inclined to advertise during the Super Bowl, for example, are looking for more tangible results. Online advertising shows marketers exactly how customers learned of their products. Plus, says Mr. Person, "Online advertising is so cheap."

Poindexter Systems, with such customers as American Express, AOL Time Warner and Mercedes-Benz, has tripled its revenues over the past six months.

In October, Bigfoot Interactive Inc., an e-mail marketing company, had its best sales month in its four years of existence. Credit card companies and other financial services firms are looking for ways to move customers to cheaper online billing. Bigfoot raised $6 million in private equity earlier this year.

Financial services software firms, long one of the most stable sectors of New York City's tech industry, have been suffering along with Wall Street. But some executives report that the purse strings may finally be loosening.

Hiring is up

"We have a strong pipeline of transactions in process," reports Heather Shively, chairman and chief executive of CapitalThinking Inc., which sells deal management software and counts J.P. Morgan Chase, GE Capital and Citigroup among its clients.

An employment survey conducted by the New York Software Industry Association shows that hiring by New York area software firms ticked up during summer and fall, compared with hiring in the winter and spring.

The pickup in New York is similar to what's going on nationwide. Aberdeen Group Inc., a technology research firm, reports that the top 20 technology suppliers in the country generated revenue growth in the third quarter for the first time in five quarters. Revenue for the group, which includes IBM, Microsoft and Oracle and is considered a bellwether for the industry, rose 3.25% from the third quarter a year ago.

Electronic commerce companies are benefiting as consumers continue to flock to the Internet. E-commerce sales over the holiday season are expected to grow by between 15% and 35%, according to various industry estimates.

David Diamond, an executive recruiter with Whitehead Mann, says he's fielding more calls from retailers and e-commerce businesses wanting to bulk up for next year.

One such firm, Manhattan-based Vivre Inc., which sells luxury goods online and via a catalog, expects to double the size of its online operation to 14 employees next year because sales have been growing steadily.

Vivre.com's average sales transaction is $300, compared with $160 at this time last year and $240 in the second quarter this year. "We are seeing 100% growth in revenues month to month," says Eva Jeanbart-Lorenzotti, chief executive and founder of the 7-year-old company.

Drawing attention

As tech firms report increasing revenues and profits, they are beginning to draw investors' attention.

"After the summer, I began noticing more activity," says Alex Lynch, a partner at law firm Wilson Sonsini Goodrich & Rosati, which advises companies on raising private equity.

Law firm Morrison & Foerster is working with four new venture capital funds, says Joseph Bartlett, a partner.

Glen Lewy, a partner at venture capital firm Hudson Partners, has begun breathing easier about the prospects of the companies in its portfolio. Sales are trending up.

"The lists that the salespeople maintain of companies they are in negotiations with and sales they expect to make in the next six months are better now," he says.

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