It's no coincidence that the computer industry peaked around the year 2000, went into a serious decline, stabilized at the low point a couple of years ago, and has since collapsed again. This all happens and continues to this day; it's been a decade-long down cycle.

A confluence of reasons is responsible for this, but when it comes to the industry bringing this on itself (rather than outside influences such as Sarbanes-Oxley), one major event may have taken down the entire business. It triggered almost everything else that was bad.

I'm speaking about the announcement of the Itanium processor. This continues to be one of the great fiascos of the last 50 years, and not because Intel blew too much money on its development or that the chip performed poorly and will never be widely adopted. It was the reaction and subsequent consolidation in the industry that took place once this grandiose chip was preannounced.

I witnessed this in real time, in person, and I've never seen anything like it before or since.

In 1997 Intel was the king of the hill; in that year it first announced the Itanium or IA-64 processor. That same year, research company IDC predicted that the Itanium would take over the world, racking up $38 billion in sales in 2001. Wow! Everybody paid attention.

At the time of the announcement, Intel stock was around $20 (adjusted for numerous splits); it began to climb fast, approaching $100 a share by 2001. When the chip finally shipped in , it wasn't about to generate $38 billion in sales, and the whole Itanium idea began to fall apart. IDC adjusted its prediction downwards, saying the chip would generate $12 billion by the end of 2004. In 2004 the chip actually generated $1.4 billion, far less than the cost of development.

Intel stock began a slide that it has yet to recover from and now languishes at around $14. You can blame the Itanium for this decimation, as far as I'm concerned. Perhaps the idea behind the chip was sound. Intel had decided that the x86 architecture was stale; it had been cloned by AMD on a separate development track, and it needed to be replaced by something completely different. But this notion was probably initiated as much to screw AMD as it was to move the industry forward.

Utilizing trendy ideas of the erasuch as RISC and very long instruction words (VLIW)Intel was convinced it could do something more modern than the creaky x86 architecture (which first emerged in 1978, for God's sake).

Andy Grove figured that Intel could pull an Apple and do what Macs did when that company transitioned from the 68000 to the PowerPC chip: run legacy apps in emulation. It's been done before, after all, and this chip would be so powerful (they thought) that nobody would even notice. No matter that Apple got lucky with its emulator, and that generally emulation sucks.

The problem was that Intel wasn't the only company drinking the Kool-Aid. The entire industry took this project so seriously that the press was inundated by both a massive roll-out campaign and a press kit that had releases from all the strategic partnerswhich was practically everyone in the Valley and beyond.

What we heard was that HP, IBM, Dell, and even Sun Microsystems would use these chips and discontinue anything else they were developing. This included Sun making noise about dropping the SPARC chip for this thingsight unseen. I say "sight unseen" because it would be years before the chip was even prototyped. The entire industry just took Intel at its word that Itanium would work as advertised in a PowerPoint presentation.

Because this chip was supposed to radically change the way computers work and become the driving force behind all systems in the future, one promising project after another was dropped. The MIPS chip, the DEC Alpha (perhaps the fastest chip of its era), and anything else in the pipeline were all cancelled or deemphasized. Why? Because Itanium was the future for all computing. Why bother wasting money on good ideas that didn't include it?

The failure of this chip to do anything more than exist as a niche processor sealed the fate of Inteland perhaps the entire industry, since from 1997 to 2001 everyone waited for the messiah of chips to take us all to the next level.

It did that all right. It took us to the next level. But we didn't know that the next level was below us, not above. The next level was the basement, in fact. Hopefully Intel won't come up with any more bright ideas like the Itanium. We can't afford to excavate another level down.