TECHNOLOGY
BATTERED, NOT BEATEN
BY
JULIANNE MALVEAUX
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If the diving NASDAQ is any indication,
the bloom is off the technology rose. Internet company closings and
layoffs continue at a dizzying pace, and some computer companies, like
Apple, are adjusting their estimates of first quarter, 2001 earnings.
The sector that has been the darling of investors for the last four
years has now become something of a demon, and blue-chip stock are far
more favored.
What a difference two years make! Once upon a time, venture capitalists were throwing cash at any B-school dropout with a dot com idea. So there was pets dot com and baby dot com, ideas that were too often not backed by either business plans or value. Talk about fools dot com! Now the house of cards has come tumbling down, and workers and investors are left to pick up the pieces. For example, Women.com Networks, Inc cut its workforce by 25 percent, leaving 85 people out of work. Their stock has lost 95 percent of its value – it was trading at about 50 cents this week, but its 52-week high was $18.50. And the San Mateo-based Women.com folks are among the better Internet companies. Unlike some, their sites have comprehensive content, and they attempted to take a new angle on women’s issues during the 2000 political campaign. I’ve worked as an advisor to one of Women.com’s political sites, and that association makes their current instability all the more disappointing. But instability seems to be the name of the game with Internet companies these days. Babygear.com had $30 million of initial founding a year or so ago. They had a celebrity spokeswoman, Marie Osmond, and partnership with another woman-based Internet company, iVillage. Money and backing didn’t guarantee success, especially since the company earned a reputation for poor customer service. Now Babygear is in bankruptcy and those who’ve shopped with the online retailer and not received their merchandise are simply out of luck. Babygear is small fish. Bigger fish, like Amazon.com, hope to capitalize on holiday shopping, and are even offering free shipping for those who order more than $100 online. But the Amazon website has gone down three times in the last two weeks, its stock is trading at a fifth of its 52-week high, and the company has yet to turn a profit. They’ve been in the headlines because they’d like to spin some of their customer service functions offshore, and their workers are flirting with unionization. Retailers aren’t the only ones being hit. E-commerce consulting firms, like San Francisco based Scient, will lay off 460 workers and reorganize. The B2B sector, supposedly hot, has apparently been cooling down. Like most other Internet stockholders, Scient stockholders have been on a roller-coaster ride this year. Scient’s stock trades as high as $134 this year. Now, the stock is selling at less than $4 a share. While technology stocks may be taking a beating, the proliferation of technology will continue to reshape our economy and our society. This stock shakeout will allow investors to search for companies who are producing goods or providing services of real value. Demographics and social trends will likely dictate which technology trends will be hot and which ones will falter, but the new climate will mean that it will take more than the words dot com and the promise of an Internet retail presence to attract venture capital. The persistence of the digital divide may provide opportunities for innovators who can develop low-cost access to the Internet, and who can combine concerns with the credit divide with concerns about the digital divide. It makes no sense, after all, to provide Internet access to those who don'’ have it, if they can'’ take advantage of a retailer'’ online presence because they don’t have credit cards. While demographics may also make it easier for some people to carve niche populations on the Internet, many are challenged to provide content along with their simple presence. For some online surfers the rule of the net is one strike you’re out. There’s so much out there that unappealing sites simply don’t get second hits. This year has made a major difference in the way people perceive
technology and the Internet. It’s not enough to offer the
convenience of retail shopping –customers want service, too. So
while Internet shopping made a dent in holiday shopping a year ago,
the six- percent it garnered then is likely to remain stable or even
drop this year. |