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So who screwed up the tech business..? Well, I hate saying told you so, but I did. From an earlier edition... "Lastminute.com did a great job of giving the e-naysayers an opportunity to forecast the end of the technology boom in world stock markets; but perhaps the disappointing sag in the price when the shares became tradable was the fault was the greed of those who set the price of the share offer. So this specific example of over-pricing might not herald the end of e-civilisation as we know it - but since all "dot coms" are grotesquely over valued when measured with the yardsticks of olde world bricks and mortar businesses, then it might just be enough to start to poke a hole in the fragile dam of confidence that is holding up the valuations in this sector." As we have seen, more than this fragile dam has been breached in the meantime, and not surprisingly, this opinion has now been joined by many others. The events of March 2000 do seem to have triggered a complete meltdown in the internet-related high technology business sector, and there is an increasing volume of vitriol being poured on the venture capital and investment banking industries. One commentator, Eric Jantzen, wrote a rather direct piece in Green Magazine ( http://www.greenmagazine.com/2000/07/000718b.asp
) is quite brutal on the matter:
"Venture capital companies, investment
banks and brokerage firms are primarily responsible for the
Internet mania. So-called "Internet technology"
companies were created by venture capitalists in cooperation
with investment banks for the purpose of issuing worthless
stock to an uneducated public "
Eric goes on to point out that the media industry that is/was
also deeply involved in taking the advertising candy from the
baby, is equally culpable in the matter, suggesting that the
marketing was for contrived solely for the benefit of hyping
the brand and hence the stock price - and not actually ever
seriously proposed to get the business towards an
old-fashioned profit. There was a belief that first mover
advantage in anything.com was essential. And to maintain first
mover advantage, it was necessary to advertise like crazy.
The internet geeks did just enough in terms of
the technology to cause their backers to foam at the mouth and
fund them to chase the opportunity to sell their stock to the
public. This was nothing more than a lottery where the
insiders could manipulate the balls, just about legally.
The investment banks played the game very
nicely, so for every genuine groundbreaker like Yahoo that
actually came along from the ground-up at the inception of the
commercial internet (and got the hype going to convince enough
people that here was the new Klondike), there were 1000 try-ons
that were ignited by just enough cash to get to an IPO, in the
hopes of enough of a stock hike on floatation that the
"financial engineers" could escape with their booty
before the fools-gold bubble burst.
But Eric may be a little over zealous in his
condemnation of the VC industry. The financial markets are now
littered with venture funds now struggling to clear up the
mess. So was that mess created because the tap simply got
turned off in April because of the high profile collapses, or
because some of the shrewder bankers simply wanted to stampede
the market and then go looking for fire sale bargains..?
Some estimates suggest that it will take a
good year for many funds to "take out the garbage"
and recover a sense of decorum. All sources of venture capital
are now sounding very prissy about wanting to see real profits
and track records. So it's probably time for the scam artists
to move on. Indeed, the very next example of hypesters and
bankers screwing a perfectly good technology business
opportunity is already upon us - the daft prices for the
spectrum in the G3 cellular business were symptomatic of the
frenzy that undid dotcom.
The dawning realisation that the punters are
going to have to pay £1 a minute for something they don't
want anyway seems to have woken a few slumbering bean
counters. Too late. £15bn is the cost of getting fibre to
every building in the UK, and £24bn is the price already paid
for Tony and his cronies to invest on winning the next
election. Mind you, that's not quite enough for a Millennium
Dome in each marginal constituency.
Playstationary
On the subject of hype, we've recently seen Sony's Play
Station 2 launch. TV pictures of scrums of people old enough
to know better support the theory that TV gaming is just as
much a dangerous addiction as anything that can create any
sort of dependency.
What a frenzy. How delightful to be able to
market a product that requires no advertising or selling, just
manufacturing. Is there really anything going on with the PS2
that a decent PC game cannot equal - or maybe even exceed..?
OK, so a fancy graphics card is going to be
necessary - but knowing Sony's commercially astute lock-in for
software, aren't users willing to compromise just a bit for
the prospect of low cost (and free) software..? Apparently
not. So I'll have a pint of whatever Sony is drinking, please!
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