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The terrorist attacks' impact on the economy has been significant in the past month. Amid the uncertainty of war and possible further terrorist strikes at the U.S. mainland, business travel is off and many corporations have put spending and decision-making on hold.
"The terrorist attacks have significantly heightened uncertainty in an economy that was already weak," the Federal Reserve noted Oct. 2 in announcing its second half-point interest rate cut since the attacks.
This new "bunker mentality" in corporate America is likely to slow adoption of many facilities-based services, with obvious ramifications for data center and colocation companies.
Qwest chairman and CEO Joseph Nacchio says the post-Sept. 11 business world is a "very changed environment."
"Maybe people are putting their everyday lives in order before focusing on business," said Nacchio. "It's too early to tell. I believe this uncertainty will probably continue for the next several months."
"People are going to be even more cautious about extending their plans in light of what is now surely going to be a recession, although hopefully a short one," said Jensen.
StratSoft's Forsyth notes that the wariness of enterprise customers will have a greater impact on colocation and managed hosting than it might have a year ago.
"The primary drivers of the last demand boom - CLECs and their ilk - are not going to rise from the ashes anytime soon, and the next great hope, corporate accounts, won't gobble up space nearly as quickly, even if times were good," said Forsyth. "A greater reliance on corporate accounts means that increasingly, as the economy goes, so goes the industry."
As a result, the slowdown is likely to accelerate the ongoing consolidation.
"Unfunded companies are more likely to fail because of the uncertainty in the economy," said Jeff Moerdler of Mintz Levin.
The economy may also limit the pool of potential buyers to those who already have the necessary cash.
"The debt capital for consolidation will become more difficult to come by," predicted LayerOne's Alexander Muse. "Equity capital, as we all know, is all but gone."
These trends will influence the kind of deals that happen, and the price for those deals.
"The large quantity of assets entering or still in bankruptcy makes traditional M&A unlikely, except where a buyer can gain customers," observed Wanger.
"Why pay a premium for equity when you can pay a discount to book?" he added. "As we saw with Worldcom-Rhythms, the stronger players will look to do strategic deals where they acquire customers at most attractive prices."
"I think it will just be more of the same: failing companies providing bargain opportunities for those few in solid positions," said Forsyth.

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