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Net Firms Running Out Of Cash?
mmccune writes, "Barrons is running an article about how many Internet based companies are about ready to run out of cash and are having trouble raising new cash. Their list includes many well know companies such as CDNow, Secure Computing, drkoop.com, Medscape, Infonautics, Intraware and Peapod.
Read more about it on
ZDNet. "
It's obvious that these business plans are risky, but do you really think Bezos and his ilk are stupid? Not a chance. The payoffs for the winners will be monumental, and many of the companies on Barrons' list will be winners.
Some day, to be sure, the dire predictions of Barrons will, to some extent, come true. But ask yourself then how long they've been wrong.
As I recall, CDNOW's rebuttal was that now they have *six* months of cash instead of *one* month of cash. Talk about a real healthy company there. Guess it's enough time to con money out of someone else.
This has been comming for a long time
Sorry for picking on you to point this out on, but what is it with people not being able to spell COMING nowadays?
Medscape is the best professional medical website because
Question: Are there any other websites that even come close to beating Medscape? To qualify, a site would need to offer at least free keyword searches, free bibliographic data and abstracts covering a wide range of journals. Full text articles would obviously be chargeable for any website indexing the academic journals.
Medscape out of all the medical websites deserves most to be able to raise money.
When's the Medscape IPO?
Arrogant == Jeff Bezos
Arrogant == Bill Gates
Arrogant == Scotty McKneely
I guess you're right! I'd say all of the above qualify as prime examples of shit, at least considering their metaphysical signature.
Hey Scotty! Fuck you man! Billy! I've got a long one for you! Best pucker up that big brown eye before Reno gets you!!
Uh? Like I believe you. Let's look at the other A.C. post: (BTW, quote in quote is in bold italics)
Medscape out of all the medical websites deserves most to be able to raise money.
Deserves to be able to raise money?
Why should anyone invest a nickel in Medscape if they don't have a realistic plan for making money and providing their shareholders with an attractive return on investment.
Wow. This is so negative dude.
My guess is that he was just responding to the flamebait (dare we say troll?) offtopic spam about this Medscape company. It's like me talking about my hernia on slashdot. Every troll's got one. Comes from thinking too much.
Out of cash??? thats bad!!!!!!!!!!
My point is that "barriers to entry" are a key part of humungo profits. Both steel companies and Internet companies don't have much of that. There isn't going to be another Microsoft on the Net (thank Jon Postel, RMS, and all the free software hackers). Investors are finally realizing this.
WHERE NETPLIANCE? NETPLIANCE DOING WELL? ;)
The original poster is right. As long as Amazon's stock price stays well above where it was when it sold those $1 billion in bonds several years ago, they are just going to have more stock holders, that's all.
Jeff Bezos ran a hedge fund before he started Amazon. He knows everything there is to know about corporate finance.
When I order a book from Amazon, I always get the damn book. I'm not about to give my credit card number to Anonymous Coward's Internet Bookstore to save $1.75 on Amazon's price.
You don't even know where the book industry makes its money, do you? It's a gift business. Look at revenues and earnings by quarter for any mature bookstore (Barnes & Noble or Borders) and you will see that they make almost all their profit on yearly Christmas sales. Amazon is especially suited for this because they make gift-giving incredibly easy.
So, when I'm gift-shopping, I don't have a specific gift in mind. I wanna browse a little. I want to read the reviews. I want someone to have a list for me, "10 good books for a 17-year-old girl".
People are trying your idea in the computer hardware business. I can go to some site and look for the cheapest price on a specific Matrox card. Except that all the stores there are cheesy-ass stores I've never heard of and I don't know if they're going to ship me a new card or a damaged returned card, so I'm not going to deal with them.
And finally ... you forgot about branding. Coke built a fucking empire on their brand image. If they can brand something like soda, Amazon.com can (and has) brand an Internet shopping experience.
C'mere and I'll break YOUR head, you little girly-man. Weak little caveman wanna-be. I'll kick your ass any day.
"Neener neener, profits are for loosers".
This story's been up for an hour, and you haven't trolled every single thread yet! You're too slow! Hurry up, you goddamn slacker!
How many startup companies hit the market making a consistent profit from day one or year one? Most startups I know weren't profitable in the early stages, but nonetheless some of those went on to become huge companies -- Eidos followed that pattern.
Red Hat sold 4 million shares at about $95 per share. Of these shares, 2.75 million were from the company, and 1.25 million were from individual share holders. So the company netted about $250 million in cash. See the 424's at Edgar (www.sec.gov) for more info.
Of course e-commerce is here to stay - from reputable companies, that actually have a product to offer, and provide for their customers.
I hope all the other wannabes fail and fold, as they should (you know, the ones who think that the IPO will make them rich, and who rip off their investors.)
There's plenty of online shopping companies that do just that (fashion sites comes to mind), and plenty whose business plan revolves around losing money.
Harry
Find Your 'Net Stock
Below, sorted alphabetically, are the 207 Internet stocks we reviewed and their ranks. Remember, No. 1 is likely to burn through its cash first, No. 207, last.
Rank -- Company
177 -- @plan.inc
154 -- About.com
190 -- Accrue Software
173 -- Active Software
198 -- Agile Software
117 -- Akamai Tech
205 -- Allaire
164 -- AltiGen Comm
45 -- Amazon.com
187 -- Ameritrade
201 -- Andover.Net
23 -- Applied Theory
143 -- Ariba
191 -- Art Tech Group
39 -- Ashford.com
33 -- Ask Jeeves
78 -- Audible
145 -- autobytel.com
59 -- AutoWeb.com
182 -- BackWeb Tech.
62 -- Barnes & Noble.com
140 -- Be Free
29 -- Beyond.com
20 -- BigStar Entertainment
146 -- Bluestone Software
153 -- Breakaway Solutions
161 -- Broadbase Software
127 -- Calico Commerce
206 -- C-Bridge Internet
2 -- CDNow
141 -- China.com
100 -- CNET
47 -- Cobalt Group
122 -- Commerce One
148 -- CommTouch Software
68 -- Concentric Ntwk
67 -- Critical Path
22 -- Cybercash
160 -- CyberSource
65 -- Cylink
180 -- Data Return
169 -- Digital Impact
11 -- Digital Island
113 -- Digital River
203 -- DoubleClick
7 -- drkoop.com
38 -- drugstore.com
96 -- DSL.net
31 -- E Loan
158 -- E*Trade
135 -- E.piphany
171 -- Earthlink
41 -- EarthWeb
189 -- eBenX
57 -- eCollege.com
124 -- EDGAR Online
70 -- eGain Comms
17 -- Egghead.com
76 -- Egreetings.com
108 -- El Sitio
51 -- E-Stamp
49 -- eToys
85 -- Exactis.com
181 -- Exodus Comm
71 -- Fogdog
142 -- FreeShop.com
27 -- FTD.com
80 -- garden.com
162 -- GetThere.com
138 -- GoTo.com
121 -- Gric Communications
98 -- HealthCentral.com
30 -- Healtheon
112 -- HealthExtras
132 -- HearMe.co
69 -- HomeStore.com
168 -- Hoover's
176 -- HotJobs.com
156 -- iBasis
90 -- iGo
19 -- ImageX.com
8 -- Infonautics
186 -- Inktomi
107 -- InsWeb
10 -- Intelligent Life
32 -- Interactive Pictures
15 -- Interliant
130 -- InterNAP Ntwk Svs
183 -- Internet.com
150 -- InterTrust Tech
137 -- Interwoven
14 -- Intraware
147 -- ITXC
66 -- iVillage
120 -- iXL Enterprises
91 -- JFax.com
63 -- Juno Online Svs
188 -- Jupiter Comm
50 -- Kana Comms
175 -- Keynote Systems
149 -- Knot
102 -- Launch Media
36 -- LifeMinders.com
101 -- Lionbridge Tech
167 -- Liquid Audio
89 -- Log On America
34 -- LoisLaw.com
61 -- LookSmart
21 -- Mail.com
200 -- Marimba
6 -- MarketWatch.com
128 -- Mcafee
174 -- Media Metrix
152 -- Mediaplex
114 -- MedicaLogic
9 -- Medscape
88 -- MessageMedia
136 -- Mortgage.com
18 -- MotherNature.com
185 -- MP3.com
48 -- Multex.com
16 -- MyPoints.com
83 -- NBCi
103 -- Netcentives
42 -- NetObjects
133 -- NetPerceptions
64 -- NetRadio
196 -- NetRatings
129 -- NetSpeak
87 -- NetZero
26 -- Newsedge
115 -- NextCard
40 -- NorthPoint Comm
104 -- OnDisplay
125 -- Onemain.com
119 -- OneSource Info Svs
58 -- Online Resources
126 -- OpenMarket
179 -- pcOrder.com
4 -- Peapod
97 -- Persistence Software
195 -- Phone.com
1 -- Pilot Ntwk Services
199 -- Pivotal
35 -- PlanetRx.com
159 -- Preview Travel
139 -- Priceline.com
25 -- Primix Solutions
151 -- Primus Knowledge
56 -- Prodigy
204 -- PSINet
46 -- PurchasePro.com
166 -- Quintus
55 -- Quokka Sports
84 -- Quotesmith.com
207 -- Radware
109 -- Ramp Ntwks
86 -- Retek
60 -- Rhythms Net Connect
157 -- S1 Corporation
44 -- Salon.com
197 -- Scient
3 -- Secure Computing
28 -- ShopNow.com
131 -- Silknet Software
75 -- SilverStream Software
37 -- SmarterKids.com
193 -- Software.com
12 -- Splitrock Services
92 -- SportsLine
194 -- Spyglass
123 -- Stamps.com
118 -- StarMedia Ntwk
52 -- Streamline.com
99 -- Student Advantage
72 -- Talk City
172 -- Telemate.Net Software
54 -- Theglobe.com
110 -- TheStreet.com
74 -- TicketMstr-CitySearch
43 -- Tickets.com
77 -- TriZetto Group
116 -- Tumbleweed Comms
155 -- Tut Systems
178 -- U.S. Interactive
53 -- uBid
95 -- USinterNetworking
184 -- USWeb/CKS
79 -- Ventro
5 -- VerticalNet
111 -- Viador
202 -- Vignette
13 -- VitaminShoppe.com
163 -- Vitria Technology
81 -- VocalTec
93 -- V-ONE
94 -- VoxWare
105 -- WatchGuard Tech
144 -- Web Street
165 -- Webvan Group
192 -- Wit Capital Group
170 -- Women.com
82 -- Worldgate Comm.
24 -- WorldTalk Corp
106 -- yesmail.com
134 -- ZapMe!
73 -- ZipLink
> It isn't going anywhere. Supply meets demand, folks.
Clear statement by an economics moron. Yeah, it's nice that at one point you read those words in a book, but do you know what they mean? Certainly there will be a market for Amazon, but unless they launder money for the mob, they NEED to make money at one point or another. So far, they ARE losing money on every sale, and have been operating in the red since inception (albeit I still don't know how that can happen, if they planned to be profitable at one point).
> shareholders probably won't shrug off Bezos'
> foraging into other areas (toys, auctions) and
> uncharted territory, resulting in huge losses
More blah, blah - Bezos' company has been losing money since the first book sold, and the 'foraging into other areas' was an economic need (diversification) to generate more cash flow, and hopefully create additional avenues of revenue. The auction model would have stood the best chance of that, if not for eBay.
So, yes, Amazon will need to change (specifically) turn a profit, if it *IS* to be around - just being recognizable doesn't give you that.
Harry
OOG ONLY WISH TO POST COMMENTS IN FORUM!!! OOG NO LIKE PASSIVE-AGRESSIVE JERKS THREATENING HIM!!! OOG DISAPPOINTED BY MENTALITY OF CERTAIN POSTERS ON SLASHDOT!!! OOG SAY FOR SHAME!!!
By all means, always beleive an ass saving statement by a no-profit company with its stock price in free-fall over an independant
study done by an investment firm looking out
for it's investors.
sheesh.
Now the truth comes out. Getting money from investors == income. Not a one of the various things you mention (IPO's, secondary offerings, etc) are legitimate income. They are ways to raise capital so that you can make/gain income.
This series of lame attacks on Barron's isn't worth the effort that's been put into it. Barron's has put a somewhat bearish view on a real problem. I.e., a lot of good money is being thrown away on bad companies that are burning it at ungodly rates.
Let's be frank. For most startups the only real goal is to attract venture capital, IPO, and eventually get bought by a bigger company. People who work there aren't interested in whether the company ever makes money, but in how much their stock options are worth. IMHO, a far too common plan is to first hire a bunch of warm bodies to make the place look busy, and then hire some contractors to make a product. Then you bring venture capitalists around to gawk. Lather, rinse, repeat.
Biscuit!
Have you tried Powdermilk Biscuits?
My, they're tasty, and expeditious...
thank you.
How can any e, i or whatever commerce work if it has to rely on an old inflexible model of economy and infrastructure???
You buy stuff on-line, you get it from by snail mail. Hello?! The e/i/*-commerce company you ordered stuff from is just a mail-order company, it's just that their catalog is online! There's nothing revolutionary about that, sorry.
We need to change that fundamental idea of economy where one has to leech money from everywhere (eg. net connections, mail deliveries, money exchange, credit card transactions etc etc) if we ever want e/i/*-commerce to bloom.
Also, think about for instance pay-per-view movies. They would be regioncoded to maximise income. So you'll end up cutting off potential customers, not good. Also, you'd need a fast connection to view a nice at least VHS-quality video. Not everyone has such things, you'll cut off potential customers. How will you pay for it? Not everyone has credit cards, you'll end up dropping off potential customers. What else? Taxes, etc. So it's just not gonna work if people try to do e-commerce the old way .
Well, since y'all are so flush with cash (and cache), please be sure to keep buying those gold-plated systems and database engines from you know who. At a 10-100x price-perofrmance premium over the low-priced-spread just because some know-nothing investment banker thinks that everything that scott and larry says is true.
who knows, maybe your brick-and-mortar rust-belt competition that actually grows, builds or writes something down the street using linux or god-forbid, the usable-by-us-dummies mass-market products, might just make a profit while you are still out paying for customer lists.
crying all the way to the bank...
(a shipping clerk at b&n).
-nt-
dude how does the screen look on that thing with X? do you have 4.0 on there yet?
Very interested in the iOpener hack for my parents' home lan, thx.
Please moderate up, so the misinformation can stop.
Yep yep yep. Corp scum has been nothing but a cancer to the internet. Let them burn. Fuck them.
The 'net is a living thing in many ways. Perhaps
some antibodies will develop to kill off the
the commercial interests.
We all reject certain aspects of the 'net in
our own ways. Multiply that by several hundred million and eventually something's gonna give.
IF THE DNS FUNCTIONED LIKE USENET CORPS WOULD
HAVE NO CHOICE BUT TO BEHAVE.
Nothing says "buh-bye" like an internet death penalty!
Well, for one, hobby sites have a genuine love for their subject matter and even their readers.
When I go to www.deja.com, I don't feel any love.
I think deja is the visual epitomy of the
e-corporate mind. Seen deja lately? Usenet
isn't even on the front page anymore. Just some
sort of bizarre rating/shopping nightmare.
What I think happens is that they( and others)
get so wrapped up in their little strategies and demographics that they start really believing that
people are sheep. They throw up these sites that amount to nothing more than pavlovian directives to give them money. Perhaps a sheep would see
something like that and do as instructed but most rational human beings see right through it and recoil as if they'd just stepped in dog shit.
------
I read the entire Tip and Mitten series in
first grade. I am invincible!
You're not funny. Don't post again.
Its all his fault.
They probably thought their boom was genuine too. I remember Business Week years ago placing part of the reason on the behaviour of Japanese share investors: interest rates were very low so they had to go into the market and they were happy with p/e ratios of 50 or so because they looked to long-term growth and market dominance and had done very well out of capitabl appreciation on the markets. Sounding familiar?
Well the reality (as we've also seen more recently in Korea) was that their companies had bought market share with borrowed money, and able to keep on borrowing because of inflated asset prices (including real estate). Of course once people started realising that the companies actually weren't making profits the whole thing went into reverse. Look at the great Japanese car industry: only Toyota and Honda are in any sort of financial shape. All to easy to end up like Nissan, owing (is it?) US$30Billion, which all the market share in the world isn't going to help you get back.
Basically any idiot can build market share by producing a good or service at less than its cost of production. All they need is even bigger idiots to invest in said enterprises on the promise of capital growth, and the process takes on a life of its own, for a while anyway, until people start to ask embarrasing questions about when their investment is actually going to generate continuing profits on operations.
Confucious say: profit is sanity, market share is vanity.
I have no connection with Medscape -- no stock/employment/contracts/etc. I just value their site for what it is --- a superb medical information resource. Why are you so negative and cynical? Do you work for a competitor?
I personally use peapod to deliver my groceries, yes they have a delivery fleet and drivers. No they do not have a large inventory of food because they operate out of established grocery stores like.. Randalls. Esentially, it IS an established retain chain that now costs $10 or so to deliver groceries to your door and even carry it into your kitchen, and when i'm buying $150 worth of food it's very worth while :) I've never heard of QFC, but i've heard of webvan and streamline, I looked them up to see if they were better and only peapod delivers in my area, of Austin, TX. streamline delivers in the DC area and some other place nearby, i think boston, but obviously not austin.webvan delivers in san fransisco, but i dont live there now do i? All in all, I dont feel they deserve to go under, the drivers are very personable, and the service has been excellent and well worth the money I fork over to them.
This could mean a collapse in losing methods like CPM(impression) based advertisments, like the ones at the top of Slashdot.org for example. Will web sites that rely on advertising for revenue(95% of them) stop making outragous amounts of money?
Thank you very much for starting up OOG tracking capability. This will be very helpful in spreading the gospel according to OOG. How long before OOG monks will appear?
The article is misleading, Barrons has always been very slanted in their market analysis, yet all the major news networks are running this story today just because it is hype. It's going to get people panicked over nothing that's truly newsworthy.
Right, kind of like the way that Microsoft never went public... wait, they did. Oh well, then, kind of like the way their stock is worthless all these years later... wait, it's not. Hmmm
Consider accounting. Companies are still using an outdated model based on the industrial revolution. They can't do anything about it though, it's forced on them, rightfully so, but much in need of an overhaul. But that's not going to happen anytime soon as long as FASB is run by dinosaurs who can't figure out what to do with older issues.
Well, you ARE wrong about Signal 11 moderating the posts down. He posts so much that he hardly ever gets moderator access. Or so I heard anyway.
One problem. It will be hard for a lot of companies to charge subscriptions because their
sites really suck.
AOL makes it's money from consumer stupidity.
Wow, they sure are making a lot of money.
Once AOL has exhausted the newbies, what are
they going to do? People rarely go back to AOL,
and are often embarrassed to admit having used it.
Having an AOL email address is like wearing
an electronic dunce cap. Dunce caps are
bad.
OOG GLAD TO MAKE DIFFERENCE ON SLASHDOT!!! OOG NO BREAK HEAD!!! BUT OOG WANT KNOW IF YOU CAN GIVE OOG FISH HEADS!!! OOG LIKE EAT FISH HEADS!!!
Is ./ going under too?
That's not news. Most business of any kind fail within the first 5 years (I think the attrition rate is something like 90 percent).
Linux is so kewl, I just wet myself every time I thinkn about it. DAMN! Gotta dash...
The only one of those companies I've heard of is CDNow.
Easy, simple steps -- yes, even you could do it:-
1. Moderate DOWN all posts questioning or saying negative things about Open Source, no matter how reasonable or accurate they may be.
2. Moderate UP all pro Open Source posts, no matter how stupid or inaccurate.
3. Moderate UP all posts from people saying nice things about VA Linux/Andover/Malda.
4. Watch VA/Andover/Slashdot stock $$$$ rise
and have a really good laugh at all those suckers who let them get away with it.
The research was done before CDNOW secured this captial (which only bought them 6 more months)
I really hope at least one of these companies survives to bring me food since the clown keeps me shut in. I hope this article was not the clown's attempt to crash the stock prices of these companies so that they will go out of business. Then I would have to venture out to grocery stores and become more vulnerable to the clown (since grocery stores won't let me bring my clown-detecting poodle into the store).
Doesn't Amazon send you books? I actually receive my orders from eToys. How many of these companies are offering new stock on a repeat basis. I don't see a ripoff Ponzi scheme here. There's just a new marketing paradigm at work that requires building a new infrastructure, which takes a lot of funds. It should come as no surprise that there's not going to be any profit for a long time, especially as long as profit is measured using age-old methods.
If you post to slashdot there's a 70 second wait until you're allowed to post again. This is a way of trying to stop people just pressing SUBMIT and filling the forum with shite.
VA Linux has about $130 million in cash less liabilities, and they're losing money at an annual rate of about $46 million. (This is computed as 4x the most recent quarterly figure.) So they're in good shape in the cash department, and have two or three years to become profitable. Yes, the stock is tanking, but they have the money in the bank. This gives them some staying power. A burn rate of nearly a million a week ! Rest in peace !!!!!!!!!
CNN doesnt have the Slashdot userbase to discuss the story. Slashdot often posts articles based on user demand.
So your as smart as I am
Knowing that Net IPO's and amaCON.com is the worlds largest scam ever
I would bet my last dollar that you are as poor as I am mr smart!
Sorry to disagree, but the business model that current ecommerce just cannot last. Ecommerce needs to turn a profit at some point. Even with a great IPO and stock price it cannot last. Would you care to explain to me where a Ecommerce business will get the much needed revenue if it never does start getting out of the red?
Sell additional stock? No, will drive the stock
price thus pissing off investors after awhile,
then they will start dumping it, next thing you
know the comapny tanks.
Sell off current holdings? So you wanna lose
control of the company you worked so hard to
build? Why not just sell it off?
Too much of the ecommerce is not innovating, rather just using current technologies to serve very small niche markets with services that they
could find elsewhere.
Holee shit dude, bet your right on the money...
OOG makes many valid points in posts here on slashdot, and I believe should replace JonKatz as a featured writer, as OOG seems to be more articulate and clear, unlike Katz.
I agree that basically these internet companies are trying to leach of the consumer without creating any viable technology, simply leaching off the consumer.
"There is no spoon"-Neo, The Matrix
"SPOOOOOOOOON!"-The Tick, The Tick
sorry, i repeated myself there...im tired, so sue me :P
"There is no spoon"-Neo, The Matrix
"SPOOOOOOOOON!"-The Tick, The Tick
snowball.com sucks because it is in league with the ever crappy Vault Network which, by the way, has sites for over 10 different roleplaying games and strategy games with UP TO THE MINUTE news with the best, most up-to-date informational fan sites you'll ever find! in addition, Vault Network sites are among the only MMORPG fan sites to gain so many exclusives!
vault network sucks, and they're arrogant as donkey doo doo.
that's not offtopic.
i am hoping you meant on topic not off topic when you said OT!
because it was on topic. think about it. let's say that i make a post that's body only says:
"i like poop"
and you respond with:
"you like poop? me too!"
well, that's not off topic.
while the parent would be off topic, in this case, the reply isn't.
you're probably one of those moron moderators who marks everything off topic or troll that deserves a -1. you mark stuff like, "I GOT FIRST POST AND AMAZON.COM SUCKS ITS GOOD THAT ITS RUNNING OUT OF CASH" as offtopic, EVEN THOUGH IT'S ON TOPIC.
man fuck you
haven't you ever heard of paragraphs? if you used them, people might read your post.
and since i didn't read your post, i must judge it by the parent when i say: your post sucks.
by the way, linux will never be on the average desktop.
Red Hat down, down, down.
Caldera ready to crash and burn on the tarmac.
The ONLY way these companies struggle to give a dividend to their stockholders is to purchase other companies that actually *do* something.
Yeah, in the true spirit of /. this will get moderated down. Hmmm... I wonder how many moderators are paid by Malda and VA?
What the hell are you talking about? -
-Davidu
# Hack the planet, it's important.
A company like CD Now has horrible record in being a CD seller, and being lame too, they won't ship DVD Videos to Canada claiming licencing restrictions (there aren't any).
Amazon has a low selection and prices that aren't good enough to even look at them. I'd rather buy locally than from them.
Unfortunately many 'Net companies just spend money and sell below cost to get customer awareness. I tried looking for an A/V reciever of a specific model, apparently many companies were either totally out of stock or wanted more than Circuit City charged. At least one time I clicked 'order' and the system said the item was out of stock. At least twice there were no prices anywhere on the site, you had to call or email to get it. And with some of these companies, I wonder what I'd have to go through to replace a lemon.
I ended up buying from Circuit City. They just recieved the latest model, the one I was looking for was actually getting phased out (but no site told me this!), and from the manual, it appears I would have liked this newer model better. I was able to dicker the price down 20$ and they threw in 100$ worth of speakers with it, by charging me 50$ for them and reducing the cost of the reciever by another 50$.
I suppose the moral of the story is shop around, online and off. With the 'Net, you don't always know if a company is 'Fly by Night', in the physical world, you have a human being there to help and the store gets a reputation that you can ask about.
Let's get this straight. A notorious troll like OGG posts a 1st post in ALL CAPS that actually makes perfect sense. Is on topic, funny and a refreshing change from the "intellectual" babble we normally want to moderate up.
Congratulations OGG. You are now the official temporary assistant Meapt. Speaking of which where is that goy?
--= Isn't it surprising how badly I spell ?
Yes, I agree with you. But it's the dollars from the customers who push the sites.
Instead of television this reminds me of radio. In the beginning it was a way for "geeks" to communicate. Then the stations and the networks came and commercialized it all.
Where are the free radios now? Why I don't care about them?
I hope there will still be a plce for the individual in the future Internet
--
__
Men with no respect for life must never be allowed to control the ultimate instruments of death.
GW Bu
Microstrategy adjusted their books to come a little more into line with standard accounting practices and the "value" of their stock dropped from 20 billion to 9 billion. Seems they were counting their chickens before they were hatched with regard to income from long term contracts, ie, money they'll be getting down the road, good Lord willing and the creek don't rise, but ask anybody who was in eastern N.C. 6 months ago about unexpected creek risings. How many of these and other "internet phenom" companies are dependent upon "special" accounting practices to keep from looking even worse off than they do?
I see even classic Slashdot is now pretty much unusable on dial up anymore.
There is no reason that Amazon could not go under!
It has plety of competetion in barnes and noble (bn.com), and borders.com, in addition to the fact that some other new company can do there service better. I can remember when I never thought Hayes
would go bankrupt but it did.
The problem will not be that any one dotcom goes in the tank. The reall downside will be the effect of the talking heads on CNN, CNBC, Bloomberg suddenly spouting about the collapse of the dotcom economy and driving EVERYTHING ELSE down as well. Since much of the market is driven by ignorance, fear, herd mentality, rumors and the like, the net effect will be that if someday the news figures out that NOT making any money and NOT having any prospect of making money in the future is actually a BAD business model and therefore such and such company's stock needs to be corrected 70 or 80% the companies that actually make or earn SOMETHING will get pounded as well. There's nothing like the feeling of complete hopelessness when I hear that some dotcom that doesn't actually do anything suddenly drops a few billion in value which sends all of the traders back to sell off pretty much everything at random whether it makes sense or not.
Companies out there are itching and straching to get to the top. Some are going to die. That is all it is really about. Understand some these companies mentioned may go under but others are not. In the years to come the internet companies that add value to our life are the ones that are going to stay.
http://theotherside.com/dvd/
So how dose barron's know this? Jupiter Communications, the foremost provider in technology statistics and predictions, claimed that AOL's user base would cap at 6ish million a few years ago. Now AOL has well over 10 million user. What this goes to show is that even the best are basically taking guesses at things like this. In Barrons case, I would tend to agree that it is a good guess. It is just important to remember that this prediction is not all that new, and that .com's have a nasty ability to stay alive for another day. Well, that is what I think of that.
The article is false. Particularly being that CDNOW definitely secured plenty of continuing capital. Look at the news.. it's around.
That's the definition of 'Junk Bonds'.
The specific thing the article claimed that might be newsworthy is that, unlike before, for many of these companies they will no longer be able to generate funds. You say the funding isn't going to dry up -- they say it is. La de da... Assuming it does dry up, it is dubious that simply raising their prices will keep them afloat. Are you gonna buy books at Amazon if their prices are significantly higher than what you can get at the local bookstore? Maybe for the odd book you can't get elsewhere, but I wouldn't otherwise (unless the convenience mattered to me that much at that particular time).
--
There's no doubt there's a huge demand for the services Amazon provides. The question is, though, can Amazon provide those services and make a profit? Ever? As long as they can fill their cash accounts by means other than from product sales, they can stay afloat. But, sooner or later they are going to have to be able to provide those services at a profit (i.e. efficiently) or they will go under. Either someone else will figure out how to do it or we will all learn it can't be done profitably. I'd bet someone will figure out how to do it (possibly even Amazon).
--
"Books worldwide by web order" is a nice idea. It becomes a "sound business idea" when someone figures out how to earn profits doing it. Amazon hasn't, yet.
The essential perversity of what is going on here is that the public market has been turned into a venture capitalist on most Internet deals. Cash-poor companies that still require major capital infusions are being taken public. That sort of company, in a prior age, would have stayed private, received the capital infusion, developed a steady business, and then gone public.
The traditional public markets are ill-equipped to play venture capitalists. Some markets -- the Canadian CDNX comes to mind -- are venture-oriented, but historically public markets have been intended for companies whose capital infusions needs were less frequent and less predictable.
The risk these companies run, of course, is that public investors don't have the same "skin" in the game that VCs do: they'll walk from an investment that a VC would put some more money into. The result? Cash-poor companies become more so. And venture capitalists become bingo-players who don't have to hang around to see how their cards gets played.
P
http://www.groksoup.com
I hate that "... Net companies could be making money if they wanted to ..." argument. Analysts like Blodgett at ML love to trot it out, and I always want to reply, "If my Aunt had wheels she'd be a bicycle."
Hypotheticals are meaningless: If Amazon could run a self-sustaining and profitable long-term business by dropping its marketing and infrastructure expenditures today, then it should. After all, Cisco could make lots more money by cutting R&D spending, but Chambers won't do it.
The reasons are exactly the same: the long-term health of both businesses requires heavy current expenditures. Except in the Cisco case the payoffs are apparent. Bezo has yet to prove that Amazon can say the same.
P.
http://www.groksoup.com
I am fast becoming OOG's number-one fan.
The ONLY way these companies struggle to give a dividend to their stockholders is to purchase other companies that actually *do* something.
Can anyone say AOL-TimeWarner merger? I thought so. Except that's one of the few net companies actually making a profit, so it's not a perfect example.
"NPS Internet Solutions, LLC "
Humm, sounds like a disinterested 3rd party to me, huh?
-- 73 de KG2V For the Children - RKBA! "You are what you do when it counts" - the Masso
--Dave
...
OTOH, ebay-like auctions will survive -- search engines can't be fast enough and their users aren't easy to find, so auction sites will remain attractive, however even in that area single leader won't be able to survive.
Amazon also does auctions (though their auction site is obviously struggling compared to ebay). I think your main point is correct, though, more and more users will bypass Amazon's high prices and go with cheaper competition once they learn that they can find it easily.
JMR
Try e-gold - (contact me). I'm NOT e-
Not sure about the other companies Barrons predicted that were going to run out of money soon, but they were very much wrong with Secure Computing.
This article drove down the stock about 30% and it was complete rubbish.
Check out Secure's response.
Secure Computing Identifies Errors and
Inaccuracies in Recent Barron's Article
Yes, RMS is far out on the lunatic fringe for suggesting that people encourage companies to behave ethically. What a nutcase!
A lot of those net firms, before running out of money the first time, had or have an IPO and raise lots of money.
This can't go on forever: A company like amazon can't keep selling new stocks. Also many that are willing to invest in such firms, have already done so.
Maybe after the IPO they can repeat this trick once more, but after 1 or 2 times they'll have to continue on their own and some day start making profits.
I think we'll see quite some of these new companies go bankrupt soon. In Holland one of these new firms, the largest ISP, also had their IPO last week. It was the largest IPO in dutch history, and their market capitalization was bigger than big established firms (and that while this ISP has only been making losses up till now).
The founders of this company are billionaires now, the IPO was 20 times more demanded than stocks were available. But after two days they are 25% down already. I think after the initial success stories we'll see some more failures. People who blindly put their money in the 'new economy' will see that it isn't that easy. Future attempts to raise money with stocks or whatever will require more perspective to profits, and no longer will people be prepared to blindly buy any stock for any price in this sector.
This is not anything new. The concept has been around the Silicon Valley, and each company has its "burn rate," which is the amount of money that the company loses each month, because almost nobody makes any money (notable exceptions excluded). Michael Wolff wrote a good book about this, called, amazingly enough, Burn Rate. You can go to its web page by clicking here.
You can trust me. I'm with the government.
I'm sick of people saying that the new wave of Internet-based companies aren't living up to the hype! I'm sick of small-minded people squawking about "profits", "revenue", or "return on investment". Don't you realize these companies have attitude! Cool commercials! Free shipping! That's what a successful business is made of. You don't measure the new, super-cool companies by outdated concepts like a "balance sheet".
They sell below cost, but they make it up in VOLUME! Can you imagine what sort of house of cards-- I mean utopia-- we'd live in if all companies were run like the Internet companies?
Insert simplistic political, ideological, or personal proselytization here.
All that day trading ameritrade $hit ain't going to help anyone either.
Couldn't agree more. I can't wait for those e-businesses to get out of town, and I hope they take that stinkin' "cluetrain" with them.
hey, i think the new economy is great... to poop on!
OOG has been making sense for quite a few posts now, perhaps we should not discriminate against neandertals and mod him up once in a while.
ps OOG, you are supposed to log in and create an account so the rest of us can track your progress. Good luck!
no sig.
What a load of interesting questions such a borring, hack kneed, desperate for print article has inspired. 21 month precictions are useless, and predictions of widespread panic are just as empty.
First off, 21 months is an eternity. Companies that can't compete tomorow will be gone by then. Everything is always changing, those who adopt correctly survive. That's what this is all about. Long term precictions are just about impossible to make.
There's nothing like taking advantage of someone's misfortune.
You seem to already know something about supply and demand, in your own petty and mean spirited way.
Let's look at the demand supply of this equation and try to make a few foolish predictions. Where's all the money coming from? Supposedly, 48% of all US households own some form of stock. 401k's, massive advertising campains by investment firms, and get rich quick media coverage has contributied to this astonishing figure. Essentially, anyone who's not eligible for some form of govenment assistace has plowed some money into the stock market. We can expect this cash stream to continue to flow untill the boomers and other high slary earners start to retire and then get sick and die. The crash comes when people try to get their money out.
How painful that crash is will depend on how "aggresively" people have bought overpriced stocks. The federal govenment strips 28% of my worth away from me each year, but it does not ruin me. Hopefully, there are very few people out there willing to risk their entire savings on the stock market, let alone a single economic sector.
Contrary to communist thought, the world always recovers from economic downturns with or without wars. People are constructive. Crashes can cause great suffering, but they are never permanent.
Tech companies take note:
Don't do what netpliance did and leave holes in your marketing strategies that allow slashdotters to run you out of business.
This is being posted from my Iopener, proudly running Mandrake 7.0!!
The poor cook he caught the fits
And threw away all of my grits
These kinds of balance sheet problems are probably symptomatic of a lot of internet companies. Huge investments in distibution systems coupled with ever-slimming margins mean that amazon will never get the return on capital investment that it needs to sustain its ridiculous market cap. The big losers will only be the suckers holding the bag when Amazon begins its precipitous drop!
A side note: if you inspect their 10-Q's, you'll see that Amazon counts as valuable assets the stocks of other etailer/etc that it made investments in. The whole industry is dangerously intertwined, people. If those other stocks drop, so will Amazon's...
There is a lot of talk around just now about the net is changing economic paradigms. Amongst the talk of dot com companies, and net based organisations going broke, and the differences between intellectual property and traditional property, there seems to be emerging a fundamental underlying difference between the way the net works and the way traditional commerce works.
;)
The examples I give above are probably only a very few of the indications that applying traditional economic and marketing strategies to the net just doesn't work.
Am I the only one here who can see that split?
So why are people still insisting on trying to employ those useless techniques to a field where they obviously will fail?
In my opinion, given a little time, what we'll see is a settling of the 'net economy.. the process of natural selection will weed out the ones who are stuck in the past, or limited by 50 year old mission statements, and what will remain will be those who have innovated, picked a market and made their own way into it, thinking their way around the problem, rather than picking up a solution off the historical shelf.
Perhaps it's a few years off, but I'd say that in the not-too distant future, we'll see a new set of business practices and marketing techniques.. ones that apply purely to the net, and ones that work only on the net.
The best thing about it right now is that I'm living at the time when I can think up those innovations, develop those business practices, and have a chance to make a real change to the world (or at least the 'net world).
May you live in interesting times
B.
To reach the conclusions presented in their article, they ignored all 1st-quarter income. This includes important investment events like secondary offerings, in which a recently-public company issues more stock and raises buckets of new capital. Often, a secondary can raise more money than an IPO, because the company can issue new shares at a substantial markup over the IPO price.
Many of the companies listed by Barron's have conducted secondaries since the 1st of this year, but including that capital in their calculations wouldn't have scared investors nearly as much, so Barron's ignored that information, regardless of the fact that it is publicly available from the SEC.
For companies that operate on internet time, financial data that's three months old is near-meaningless to today's operations. Barron's knows that, but if they used current data, they wouldn't have the numbers to support their case.
To anyone who takes a moment to examine the accounting practices behind this article, it is clearly yellow journalism.
...never even heard of drkoop, medscape, infonautics, intraware and peapod. Are these just made up or something? Anyway like I was saying, did anyone else see this coming? How can you stay in business when you don't make any money? Hello?
I don't know about you people, but I rarely if ever find something useful on a corporate web site. They are always impossible to navigate, and contain boring content which just screams "venture capital." What makes the web interesting is the hobbiests and the personal sites. Personal web sites are interesting (I have one!) and "real" sites like Slashdot (yes I know they got bought out, but the site hasn't changed that much since the time when it was "underground") are where the best surfing takes place...real people presenting content because its something they like, not to make money. That's what separates the web from any other form of mass-media -- anyone can do it. Whenever you start injecting corporations into the picture, you eventually end up with watered-down garbage similar to network TV.
My 2 cents.
-W.W.
"Well it should be obvious to even the most dim-witted individual who holds an advanced degree in hyperbolic topology...
Bah. Until search engines become a lot smarter, and have much better interfaces, nobody will "discover search engines".
[factoid alert] Out there in the real world, most people are technophobes; they will find one thing and one thing only that works for them, and will use it exlusively forever.
They will also pass along knowledge of their discovery by word-of-mouth to other consumers (also technophobes). None of them will be recommending search engines anytime soon. Mindshare is Amazon's greatest asset, IMHO.
Any sufficiently well-organized community is indistinguishable from Government.
The only reason they didn't break even was because they spent even more than that building for the future - spending on advertising, building brand awareness, implementing new features. If they would just all that right now, they would be a profitable company.
Well, this isn't entirely true. Amazon includes their fulfillment expenses in with their marketing expenses. Fulfillment costs are not just going to go away, so some of what they call "marketing" expenses aren't that at all, they're costs of running the business. It seems likely to me that every time you order a book from them, they actually lose a bit of money....
You can't shuffle something like the e-commerce craze away as some passing fad, no its here to stay whether we like it or not. True some things lend themselves to this trend better but its like trying to say that the telephone will go away since it just a silly craze. Computers are another avenue for communication as well as interaction. I think we've only seen the tip of the iceberg...
Nathaniel P. Wilkerson
NPS Internet Solutions, LLC
www.npsis.com
Nathaniel P. Wilkerson
www.haidacarver.com
As to whether Peapod has to stock food or not, I don't think it really matters whether it's a grocery chain with delivery service like Albertsons.com or a delivery service that gets its food elsewhere -- my point was that it's really more of a brick-and-mortar service company than a pure IT company like, say, eBay, which doesn't have to maintain a fleet of trucks and drivers. --q
Here's the thing -- many of these companies, like Peapod, are essentially brick and mortar companies. Peapod has to maintain a delivery fleet and drivers, a distribution network, along with a huge inventory in food, and its only real advantage over having groceries delivered from, say, QFC is a snazzier front-end. It has all of the costs and none of the advantages of an established retail chain.
Amazon, by contrast, has a marked advantage over the retail Barnes and Noble: no sales tax in most states, no storefronts, just the front end, some fancy servers, and a couple of contracts with distribution houses to ship stuff out with Amazon bookmarks in it (sounds like a business process patent in the making to me).
What we're likely to see in the coming months is a shake-out of firms whos creation on or migration to electronic commerce was ill-advised in the first place, and firms who don't have any competitive advantage over traditional providers. -- q
Speaking of the Kozmo investment...
Looks like Amazon doesn't realize they are out of cash as they just spent 50 million to invest in Kozmo. I guess it is now 18 months instead of 21 months they have to exist!
I really think this report is a load of garbage - several of the companies on this list are not in danger at all - just look at CIBC and Merril Lynch coming out and defending several of the companies. It is one thing to look at the cash, but another to understand the true resources. Any bozo could have made this Barron's report just using Yahoo finance and looking at how much cash the companies have and what their losses have been.
The net truly is the biggest change our society has ever seen and you CAN create barriers to entry there, that is why the bleeding is going on. (If you don't believe you can create barriers, just look at Amazon, Ebay, and Yahoo - though others continually try, they fall way short of the masters).
--Sunbane
"I asked for a car, I got a computer... How's that for being born under a bad sign?"
- Ferris Buehler
Everything done in the free market system has at its base an undervalued resource with a very low and very stable price. Marxists screamed for years about the undervalued "worker", and now when we say $1.50/gallon of gas is "too much", we've obviously cut the odometer cable to reality: THERE'S LESS AND LESS OIL EACH DAY! OF COURSE THE PRICE WILL (NOW OR LATER) GO UP!!!.And of course all the people who value-add to oil will sooner or later not be able to hit their price points, and inflation will soar. But with the Internet and IT in general, there is no cheaply-had base resource with which we can play games. IT work is expensive. There are no Mexican crop pickers or cheap Arab oil in the computer business. And the Internet gives only advertisements or subscriptions (if you're not an on-line store) as possible revenue sources--and of course, both are proving to be failures. An historian (whose name I forget) was interviewed on CSPAN about her new book. She is famous as a researcher. She was asked how much of her book's material came from the Internet. Some, she replied, but the majority--especially the good stuff--came from conventional (and pricey) sources. She went on to say that she was supported by grants, and that book sales would not come close to covering the cost of the book. I got a few things from her: 1) the Internet is hit-and-miss, 2) there is no real market on the free Internet for serious information value-adding, 3) Information is not and never will be a cheap base resource upon which to stack big money-making value-adding. This leaves the Internet's only contribution to the business-to-consumer market as the electronic version of the shopping mall. There it will probably fly, even well. But there's probably not much outside of the e-store that will work capitalistically-speaking. (Yet again) I have spoken....
--- WWSD? What Would Strider Do?
What? Where else will the tremendous demand for anywhere in the world, before the end of the day, rutabega airlifts be fulfilled?
Hopefully I didn't put any [] around my words.
OOG GET THIS ACCOUNT, SADLY OOG TAKEN, AND OOG MISTYPE EMAIL WHILE REGISTERING OOG THE CAVEMAN. THIS REAL OOG ACCOUNT, SO NO NEED TO BREAK HEAD OF IMPOSTERS!!!
OOG THE OPEN SOURCE CAVEMAN!!! OOG BREAK HEAD WITH OPEN SOURCE CD!!!
What took them so long? Give some to me, and I'll show you guys how fast money can really dissappear. hehe.
Treading carefully, they sure are. But making *tidy* salaries and giving blue-chips the willies isn't just thanks to greenhorn VC managers. Remember the invention of the telephone? Recall the advent of the automobile? Cast your eye back to the way gunpowder changed armed combat. It was never this easy to play before. Even the greybeards are realising now that the information revolution WILL change the way information flows (and e-commerce is only the icing on the cake). Business WILL be turned upside down, and new commerce channels WILL dominate. But I'm itching to get past the argument of whether the bubble will burst. There's no question of a bubble bursting, the question rather is this: When everything settles down in 2010, who will the new leaders be? Let's stop betting whether any of the horses will make the finish line, and start picking the winners. Here's the 'Lucky' formula for internet value creation: 1. Find an example where you have to pay, or wait, for information transfer. (eg. waiting to check in at the airport, or paying for a newspaper) 2. Start up a company to perform the information transfer for a few cents, in just a few milliseconds. 3. Count all your derivatives while you wait for the contracts to roll in. The reason I'm glad to be alive in this decade is that I know somebody's gonna make billions, but nobody can be quite sure who. We've had the revolutions before, but never the uncertainty. Place your bets, pour yourself a white russian, and watch the dotcom stock prices party.
"We're taking this bloody car to Invercargill boy!" - Goodbye Pork Pie
COuld this lack of cash have anything to do with the fed's increasing of the interest rates. It might actually have the desired effect of stopping of slowing down the part of the economy that seems to have no end of growing in sight. Just a thought. "Sweet Jesus Christ, there are only two things that come out of Texas, and that's steers, and queers. And you don't have horns so I guess that narrows it down then doesn't it." --Drill Seargent (from Full Metal Jacket)
"The heresy of one age becomes the orthodoxy of the next" - Helen Keller
Sure, the technology is where the cool stuff is, but apply it to business and the real challenge is age-old: brand image, credibility, service, etc.
From a business owners point of view, you have respect for the individual, benefits, and corporate image (internal and external). Stick up for your employees and they'll stick up for you.
Sacrifice. Like the oldest American brick and mortar companies (of if you go to Europe, the companies who have existed for centuries), these companies invest in the people who are, in the end, the business.
The technology will plateau and the ones left standing will be sticking with age-old values. Business that is good for the employees, good for the customers, and good for the competition. Yes, competition.
Think of it this way, if your employer fudges the accounting records, what happens during inevitable bad times? Is your paycheck going to bounce while the employer sun bathes in Florida? Sounds like a shaky employer to me.
Let's see what happens when the startup capital runs out to see who is left standing under what kind of guiding principles.
Sounds like a died in the wool shareholder to me! Fatal Flaw w/ Internet Shopping- APPARENTLY... MOST PEOPLE (not me) LIKE GOING TO THE STORE. MOST PEOPLE LOOK AT BROWSING AS AN ACTIVITY. LOOK AT ALL THE STORES AT TOURIST DESTINATIONS. DO YOU THINK THEY'D STAY IN THEIR ROOMS IF NET SHOPPING WAS OFFERED TO THEM. ...ALSO LOTS OF FOLKS WANT TO "TOUCH AND FEEL" ...I FEEL CATALOG SHOPPING IS A LOT EASIER, DEFINATELY MORE PORTABLE.
Some major bankruptcies would be a great thing for business on the 'net. It would force companies to operate like legitimate businesses. In turn, this would bring a whole lot of badly needed credibility to the e-commerce business models.
Speaking of losing money, remember the Microstrategy CEO - Michael Saylor - who pledged $100 Million to start an online university? Well, his company stated on Monday that it would "restate its earnings." (In financial talk, this means: we goofed up in our accounting, here's the real figures.)
This is a BAD THING for the company. It was SO BAD that the stock price dropped $140 in one day and Michael Saylor himself lost $6 Billion. Imagine losing about 2/3 of your wealth in a single day. Don't worry though, he's still worth a healthy $3 Billion.
And here I am worried about the thousand dollars I'm down for the year...
You should never take life too seriously - You'll never get out of it alive.
With fewer startups nipping at their heels, the leaders like Amazon will reduce spending on promotion, and they'll start to show profits.
Why and how? All amazon tv advertisement will do is bringing more customers into ordering through the Internet. Customers eventually will discover search engines, and everyone who can undersell Amazon, will do that with no money spent on advertisement thanks to hordes of users that Amazon brought and improving search engines that will be able to look for products without any human assistace at the server. Old aging search engines will change into over-commercialized "directories" and "portals", but new ones will appear fast enough to keep enough unbiased information available.
Then the number of people outside US that are using that mechanism will increase enough to make reliance on "dumb consumer" even less profitable, and system will reach some balance, with no place for "leaders" like Amazon.
OTOH, ebay-like auctions will survive -- search engines can't be fast enough and their users aren't easy to find, so auction sites will remain attractive, however even in that area single leader won't be able to survive.
Contrary to the popular belief, there indeed is no God.
The company that sells 10*N books still has an avantage over the company that sells N books.
In the case of books I have meant publishers themselves. They can organize their internet-assisted mail-order much easier than Amazon -- if cost of distribution is driven into the ground, why waste money on middleman like Amazon?
Companies spend money on advertising, not just to spend money, but to gain more customers and thereby gain the advantage of scale.
When company can't distingush itself in the eyes of consumers, no advertising will help. Look at Pepsi vs. Coke -- even though their ad campaigns probably somehow increase the consumption of their caronated beverages, pepsi and coke ads don't "pull" consumer to either side, in the best for Pepsi and Coke case ad can make him more thirsty, but he will still buy either of beverages with approximately the same probability regardless of whose ad he had just seen.
Contrary to the popular belief, there indeed is no God.
Many small sites, including my wife's, are turning a profit, albeit a small one.
If these huge sites fail to ever become profitable, and if VC starts to dry up, it won't kill the net; it will just restore some balance again.
Personally, I've heard too many lame ultra-commercial "concept" site TV/radio ads. A respite from those would be more than welcome.
New XFMail home page
/bin/tcsh: Try it; you'll like it.
Buisness is about making money, and many of these 'Net' companies need to start to get it. You cannot simply say that you'll be profitable in 'a few years'. 1 out of 10 venture capital companies actually makes money. I forsee the same happening with the .com's of the world.
.com's to be successfull, they need to make money. Alot of money. In many cases, they just don't have any time left to do it..
Amazon, one of the biggest online retailers, hasn't even made one lousy dime yet. It'll be *great* if they do eventually, but at what cost? If I sink $100 in something every year, and after ten years, I make 1$ profit on it, where have I made any money? Ok, the year after that, it makes $100. After that, $200. then $400, then $500. Ok, that's great, but it took 15 Years to do. Granted, I'm blowing it a tad out of proportion, but in order for these
-- I'm the root of all that's evil, but you can call me cookie..
At least in the case of Secure Computing, I'm not suprised in the least that they can't get funding. They are a local company located a few miles from my home. I considered working for them, so I studied them in depth, reading their 10K reports and talking to people who worked there.
The impression I got was that they are like so many tech companies in this boom. That is, they weren't growing fast enough. So they tried every fad around. Then they moved their headquarters to San Jose, despite the fact that they still remain largely a Minnesota based company. They moved most of their effort out of building UNIX firewalls into porting to NT. Now everybody wants UNIX--oops. And of course they acquired other companies only marginally related to what they do, things like filtering software. Only to find that they were a poor fit and quickly worth less than what they paid for them.
The shame of it all is that they grew in the first place because they made good firewalling software for UNIX, mostly Sun. Now they're back to where they started, poorer and out of cash, suddenly without all the good engineers that made them a good company in the first place.
That just what I'm saying won't happen. Wall Street is not dictating their fate here. They sold 600 million dollars of stuff last year. The only reason they didn't break even was because they spent even more than that building for the future - spending on advertising, building brand awareness, implementing new features. If they would just all that right now, they would be a profitable company. It's not an attractive option, but it's doable. Bezos and his cronies are smart enough to head something like a collapse of the company off at the pass. I don't think they would let it get to the point where their stock will be selling for pennies a share and they face a possible buyout before they become a lot more interested in pacifying their backers.
--
I think there is a world market for maybe five personal web logs.
It's 'dyed'. I'm still alive, and I wish I could tell you differently, but I'm not a shareholder.
/your/ fatal flaw: making the assumption that shopping for a washing machine and shopping for books are the same thing. They are not. People, even me, love to go to the store to try out what they buy. I used to do this with computers before I knew enough, and I still do it with clothing, appliances, etc. Those are the things people want to "touch and feel" or catalog shop. It's just not in our nature to make large purchases sight unseen.
And here's
None of that is true for books. I have never catalog shopped for books, and neither have you. Don't try to claim to the contrary. Shopping for books does not fall under the same paradigm as "traditional retailing." Tourists don't go book shopping. Either you've never traveled or you have never seen tourists, but the only time they buy a book is to pass the time in transit. Tourists shop for amusing things - necklaces, postcards, whatever. People like to shop, and they always will, but not for stacks of paper.
Books are cheap enough that no one really minds One-Clicking a few, because if they are great or if they suck, you're still only out ten bucks. I couldn't say the same for a microwave or dress, where you have to try it one or check out all the features. Furthermore, Amazon.com provides a very convenient service in customer reviews and sales rankings for every product. "Still not sure about whether you should buy this book? Here, look at what other people had to say. Look at how many people are buying this book." Some people like to spend time in bookstores. I love it. But a lot don't. They are busy, and they heard about this cool new sci-fi novel or biography, and they just want to log on for two minutes, click the mouse a few times, forget about it, and be pleasantly surprised when the book is waiting at their doorstep a few days later. Amazon, with One-Click, has made this about as easy as it can be, and that's why people paid them over half a billion dollars last year.
--
I think there is a world market for maybe five personal web logs.
right now. Their losses have (allegedly) come from their expansion into other businesses.
I wonder if this wasn't a mistake. amazon.com electronics is not that compelling a creation, since I can get identical if not lower pricing from bricks and mortar stores.
D
----
Bah humbug. I'm not going to say that there wasn't, nor isn't, significant stodginess amongst the wall street community. However, not every criticism of the so-called "new economy" is irrational or self-serving.
Ok, first point: The VC don't care about the ultimate sucess of these companies, atleast not in the short run. So long as the VCs can get in, and quadruple their money after the IPO in only a few short months, they're happy. The VCs, of course, depend on a highly receptive and irrational market, whether or not they recognize it.
Second point: Your example would only allow for the VC firm to break even--hardly a worthwhile investment. 10 companies by 10 million dollars equals 100m, if only one company suceeds and returns 100m, that's 100m in and 100m out. In other words, they've only broken even. Which, in a time-value of money point of view (not to mention inflation), is actually a loss. Because that 100 million dollars could have been invested in almost anything else, and returned significant profits.
Third point: The math doesn't work out like this in reality. As it stands right now in publically traded firms, almost every single DotCom IPO has been a winner. To criticize this is hardly irrational. The aggregate of the market capitalizations of all these Dot-Coms is impossibly high. They either would all have to grow at an impossibly high rate, or you accept something like your previously mentioned scenario, where one in ten does well enough to make up for the losses in the failures--the growth rate and/or profitability required for that is virtually impossible.
Amazon is overvalued. That is a problem for anyone who is invested in them. Once the market understands that they can't grow at anywhere near the rate implicitly (though not necessarily conciously) anticipated, their stock is going to fall hard. Furthermore, Amazon, like many of these DotComs, implicitly depends on the market being there for them when they need more cash. The drier the market becomes for them, the harder they're going to find it to raise capital, the more they dillute their stock, the poorer they perform (as a stock), the drier the market becomes, and so on. I predict these DotComs are going to go the way of the BioTech stocks of late eighties and early nineties, from redhot to untouchable in 0 seconds.
I would also remind you that what Amazon "could" do is irrelevant, what they do do is the only important question. If Amazon is overconfident of the market, and treats their cashflows accordingly, they may find themselves at a point of no return if the market dynamics change significantly.
At this point, Amazon is damned if they do, and damned if they don't. They can't possibly meet market expectations, and their stock has to come down no matter what management does. Amazon can either try to fulfill those growth prophesies (which they'll never meet anyways, and depending on the market to back them up when they need cash again), or they can cut their losses and try to attain profitability, at the expense of future growth. Either way, their stock is going to fall.
The bottom line: Amazon might succeed as a company, but that does not mean it is sane to invest in them at this point!
I certainly don't think the bursting of the "internet bubble" will hurt either directly (e.g., not in sales). However, the PE ratios of many of these non-Dotcoms are extremely high. For example, Cisco was almost 200 last time I checked! Granted, they have significant growth opportunies and they're well run. Nonetheless, at 200 it's very questionable. I wouldn't be too suprised, if, when the dotcoms start turning bellyup, the market also "re-examines" the valuation of non dotcoms as well. Cisco might very well recieve extra-scrutiny, because of guilt by assocation.
Look at Pepsi vs. Coke -- even though their ad campaigns probably somehow increase the consumption of their caronated beverages, pepsi and coke ads don't "pull" consumer to either side
Dumbass. Being pure of mind and heart, you drink only what quenches your thirst best for the least amount of money. Marketing and advertising doesn't work on you. And it doesn't work on the people who decide what drinks go on the shelves of grocery stores and Quick-E-Marts. And it doesn't work on the people who decide what brand of drink goes with the supersize combo you just ordered.
Coke has one of the finest brands on the planet. The best thing for them to do would be just save their money by not re-investing into that brand. Marketing doesn't work. At least not on those who are pure of mind and heart.
the worst impact of this bubble burst will be felt by such companies as Intel and CISCO who provide products and services to dot coms
Don't forget that when these .coms go belly up, poor, little Intel will really get it in the nads. If only they had some other source of revenue, like the rest of corporate America, plus all of the American consumers above the poverty line, plus all of small business in America, plus these same markets all over the fucking planet, plus the case cash reserves to buy and sell the moons of Mars... wait, they do.
Try to think before you type.
There was an article in a recent Newsweek explaining that Amazon is one of the few net firms that's actually trying to borrow money instead of just selling stock. As a result, they're the only net firm with a credit rating, one which puts them slightly below "Ha! You want us to lend you money?!". The thing is, they think they won't have to pay back their bonds because they're convertible into stock (all except their earliest bonds). They expect their stock price to continue to rise, and then these people will convert the bonds, and they won't have to pay them back! Somehow I doubt their stock price will continue to climb as much as it has, and they will find themselves facing a great deal of debt.
NB: I know very little about financial markets, particularly corporate bonds, and I'm just parrotting a Newsweek article. Correct anything!
Apple never sold their product as a loss leader to gain marketshare.
Just the opposite. In the mid to late 80's, their profit margin on hardware was at least 40%, and each year that the pundits predicted Apple would go under, they made more and more money! Over the complete history of Apple, there have only been a handful of quarters where they had a loss.
What I think is more interesting: during Apple's hey day in the 80's, their stock never went above ~50. Now it's between 115 and 130!
So much for believing "the experts" and pundits like John C. Dvorak.
As for Amazon, here's there strategy in a nutshell:Q "But we lose money on every sale! How are we going to make a profit?
A: "Volume!"
Q: "But with more volume comes more loss!"
(beat)
"I'm fired, aren't I?"
Pope
It doesn't mean much now, it's built for the future.
No, RMS is far out on the lunatic fringe for trying to force his silly idea of ethics on everyone else in the world.
DrLunch.com The site that tells you what's for lunch!
Back to basics, hey? You mean the way it used to be embarassing to have a ".com" in your email address?
Bingo. Amazon has done a lot of things the right way. I have ordered a dozen or so books from them and they have been at my doorstep in 3-4 days each time. Heck, I'll spend a couple bucks if I have to and get it from them because of their service. The true winners of the Inernet E-commerce businesses will win on one thing: SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE.
That's not to say that price isn't important, but service is going to be more important, IMHO.
On that note I read yesterday that Amazon signed a deal with the folks at Kozmo that will allow them to deliver books in an hour in areas where Kozmo is doing business. I would say that they have a real good clue and are moving in the right direction.
This article is truly shoddy reporting. It was based entirely on the cash situation of these companies as of 12/31/99. While there definitely are some companies on the list in desperate cash flow scenarios, many of them have raised additional capital since the beginning of the year.
Barron's is not a well-respected source of financial analysis, and many of the major analysts have criticized the article.
Heck, the pundits have been saying Apple will die for the last ten years, and all it's done is make them more profitable. Maybe this is exactly the sort of fool-the-evil-eye promoting that Amazon needs to make it big.
"If one is really a superior person, the fact is likely to leak out without too much assistance" -- John Andrew Holmes
Still don't think the ads are effective? Try standing outside a WalMart on a sunday afternoon, and watch the soda machines carefully. The Coke machine will still get business even though the Sam's Choice machine right next to it is priced 20 cents lower. That's what advertising does for you.
-rpl
Oh stop your celebrating.. Amazon is not going to "fail" or "collapse".
You're right, but whether the company will survive as an independent company with their precious independent stock symbol is another story. If Wall Street ever gets tired of their oceans of red ink, AMZN will probably be acquired at pennies on the dollar--by Walmart, perhaps? Walmart.com--with "books by Amazon." How's that for establishing a presence on the internet?
Does this mean we can stop hearing about e-this and e-that all the time? And with this put an end to the Windows 2000 commercials about this great (:P) OS for "the Business Internet" We can only hope...
Chris Hagar
"The price of freedom is eternal vigilance." - Thomas Jefferson
Ponzi was a certifiable intellect in comparison to some of the outlandish stuff perpetrated in the name of 'internet-business'.. Postal coupons, a couple of plausible lies, and some investors walked away happy. 'E-Commerce' was a implausible corporate lie based on the lies of it's vendors, further embellished by the lies of the users, and I'm afraid none are going to walk away happy. Except those of us that always believed that 'Eanything' was pure bullshit. Perhaps when all the 'dot-coms' fail, the Internet will return to being a communication medium instead of something that should be 'owned', that requires a 'presence', thqat required a new marteting 'buzzspeak' every week when someone furthered the dot-com game of spam, or invaded the privacy of the global community of users to 'direct-market' them.
Fuck you all. You had a chance to play with our toy, and now that you're out of cash you've got to give it back and go home crying to your investors. Good riddance too..
.sig: Now legally binding!
As I recall from a speech Vint Cerf gave at my company, he said that during the California Gold Rush, the folks who got rich were not so much the miners (though a few struck it rich) but those who sold mining supplies -- pick axes, mules, etc.
Even after the prospectors were gone, the folks who sold supplies did just fine when the other settlers came.
Intel and Cisco sell mules -- I think they'll be just fine.
Amazon's on the list! WooHoo!
On another note, businesses fail all the time. It just happened that net businesses usually did very well. Now they are starting to collapse just like brick and motar counterparts.
The company that sells 10*N books still has an avantage over the company that sells N books.
Companies spend money on advertising, not just to spend money, but to gain more customers and thereby gain the advantage of scale.
One of these days, you won't be able to raise cash simply by adding an e to your name. That day will be the day when the small dotcoms perish and the big ones grow even bigger.
All opinions are my own - until criticized
If a trusted source says "Stocks are overrated" the stocks fall. If a trusted source says "the dollar is insecure" the dollar falls. And if a trusted source says "The internet boom is over" then it is over.
Some dotcoms will survive, some will be eaten by those who do. I personally think that Amazon will be among the survivors if they play their cards right. "Books worldwide by web order" actually is a sound business idea. Once the boom is over they can cut down on advertising (since they already have a brand name) and live on sales rather than stock.
All opinions are my own - until criticized
The publishers logistics are built for large scale deliveries to middlemen, not for consumer delivery. As long as there are physical products from different sources involved, there is a place for middlemen. Principles about patents aside, Amazon actually offers something more than a mere search engine. A search engine will only show me what I ask for, not related items. (unless someone builds a "meta-amazon" SE)
When company can't distingush itself in the eyes of consumers, no advertising will help
I repeat: The ads are there because they *work* Even the most brain dead diaper commercial is actually carefully manufactured to pay off.
Pepsi and Coke monitor the effects of their advertising closely. Believe me: *They* *actually* *work*
Of course Amazon might die. There is no telling which dotcom will make it and which won't. The internet boom has given them a chance to expand faster than otherwise possible, but that just affects the time scale, not the principle. In the end, good business models survive and bad ones disappear.
All opinions are my own - until criticized
Wake up and smell the coffee, Forge --
Our contacts in the Kremlin said the UGN-3676 code was supposed to be discontinued following Glastnost! You should be using the RZW-7751 cointerintelligence standard for transmitting secrets outside the U.S. base of operations!
Waitaminute, the other contributors to this site are probably reading this message as well! Abort mission! Abort! Abort!
Keep up the great work, I really enjoy your posts.
Finally, all the investor hype over the ".com" stocks has worn off. Now internet related companies will have to actually show that they can make money in order to succeed. Imagine that ;-)
For those wondering "how could it be?", here's a simple rule of Real Economics:
Equity DOES NOT necessarily mean capital!
Equity is what you use to buy other companies and raise cash from investors. Capital is what you use to pay the bills, ship the goods, and do all the mundane things like that (pay your employees, for instance). As long as these dot coms are all losing money, they will be dealing with dwindling supplies of capital. If the market is no longer interested in the company's future, there will be nobody to exchange equity for capital. Your stock can be worth a fortune on the Street, but if people won't buy the stocks or securities you issue, you'll run out of capital. Period.
The other side of this is that equity in the dot com world is like a shark. If it stops moving, it dies. Companies need to keep making aquisitions and keep selling equity to expand in order to maintain investor interest. So far, there hasn't been a whole lot of interest in profits, but that will invariably change - and probably soon. Companies that are low on cash don't necessarily have to make money today, but soon - real soon. Because otherwise the dogs'll stop eating the dogfood, and that's what these companies will become. Don't use Amazon as an example - it's not so much that they are trying to become a huge Net company, the're tring to become a huge compoany, period. That creates a somewhat different mentality.
Peapod will probably be the first of these companies to go down. Their strategy was for many years to use a proprietary Windows & modem-based system to place orders that would be fulfilled by local partner grocery stores (Stop & Shop here in Boston) using Peapod vans and employees. They finally went to the Net, but all the supermarkets are moving off on their own and leaving Peapod behind. They had just planned a debt offering that was abruptly cancelled last week when their CEO quit, and now they only have a couple of monts' worth of working capital, despite their stock value. They're toast. Someone will buy them for pennies on the dollar, and then only for what's left of the brand name.
That particular case is a little bit near and dear to my heart, since I used to work for an ad agency that did supermarket flyers. And we thought about going on the Net with our customers about four-plus years ago, when Peapod was still using modems and no other web businesses were on the drawing board. This was in the days when people still believed that an immediate profit was needed to prove value. So we wimped out. As it turns out, we could have started it, lost money, sold it, and been dot com millionaires by now. Bitter? Me? Naaahhhh....
- -Josh Turiel
-- Josh Turiel
"2. Do not eat iPod Shuffle."
When the money runs out, there will be a huge shakeout. Pure content plays are going to really get slammed, along with anything else that relies on ad revenue. What will we learn from this? Perhaps that it is better to start small, building out your business as you gain customers, than to burn huge amounts of money on marketing, hardware, and what amounts to buying customers. IOW, that the good old-fashioned way was better.
-jwb
Whether or not the Barron's article holds water is moot, the fact that people are starting to tread carefully around the "netconomy" is so rad. Everyone will fall victim to cash flow at some time, despite what everyone thinks about e-commerce. A majority of the new internet based companies are service providers, a service business is VERY EXPENSIVE. Manpower is expensive especially when a company needs oodles of noodles of programmers to maintain their site. What I bet you'll see is all the damn nitche market companies start to die off, ones that need 10 million a year to operate but don't make nearly enough to keep running. It used to be an IPO was to get EXTRA cash to cover expensions, aquisitions, mergers, ect. not a quick and easy way to get some attention and make the CEOs billionaires overnight. If you take a step back all these net companies start to look like well funded get-rich-quick schemes. Build a website, get alot of people to check it out at least once, then overevaluate it's stock price. The investors sell out with their chunk of the cash and buy Ferraris and 5 bedroom houses in San Jose. If you want a successful internet company watch television for a day, the stuff that makes money on television will make money on the internet being related media types. Entertainment, edutainment, and product sales. E-companies also forget an important thing, money. You need to CHARGE for your services rather than give them away for free. Advertisement revenue does not make nearly as much money as charging for services. People need to visit your site for the ads to work. If a million people visit in a single day you make alot of money, if after the first day only ten people come to the site you're screwed.
You want to know a good way to charge for services? SUBSCRIPTIONS! Magazines and newspapers have been doing this for centuries! With subscriptions all you need is that first million page hits. AOL makes their billions in part to subscriptions, the subscriptions don't make the company money, they save them money. Every person on AOL subscribes to view advertising and product promotion, AOL's cash cow. Their internet connection (cost distributed among millions of users) only costs AOL 15$ at most, then on top of that AOL gets another 6.50$ that covers regulatory and rental fees. But for every 21.50$ that a user costs AOL they make them 1,000$ from advertising, affiliates, promotions and the like.
If you want to start a company on the internet ask yourself what you can provide to people, then ask how much it's worth to them, give them a discount, charge them for services, use them to make you money, and lastly, niches are for weenies.
I'm a loner Dottie, a Rebel.
I can't wait for the day when companies get interested in profits again, as opposed to the current stock price. Used to be businesses sold products. Now they just sell themselves. Sounds too much like prostitution for my tastes.
A Government Is a Body of People, Usually Notably Ungoverned
According to this article, the methodology applied in calculating these companies that are going to go broke is flawed for "wholesale application". In summary,
Barron's calculates the "months until cash burn-out" by extrapolating Q499 losses aganist Q499 cash position. This is flawed because of three main reasons:
I haven't read the article, so I can't really effectively offer my own opinions. But suffice it to say that I'm not worried about my stocks. Ever since I heard an analyst on CNBC say that IP is "the technology that allows you to click on a link and retrieve a web page" and then attribute that to a company's profitability and business model, I haven't put much faith in "professionals" and their prediction of technological companies.
J.J.
>> If Amazon could run a self-sustaining and profitable long-term business by dropping its marketing and infrastructure expenditures today, then it should
Ah, but you specify long-term. I just said they could turn a profit this year if they slashed their promotion budget. But they know that if they don't keep growing, somebody will grow bigger, and they'll cease to be profitable. There are a going to be a few big survivors in each category, the rest will be also-rans or mom-and-pop operations. Think of how much Coke and Pepsi sell, compared to how much all the other colas sell. The 'net will probably allow for more survivors in each category, but there will still be a big payoff for being one of them.
Not Peapod! Why, if we didn't have Peapod, then where would we get our groceries online? Oh, wait a second, we still have Webvan, Streamline, and countless other local companies. So there'll be a lot of shakeout among the various online companies, and the less successful ones will die or be bought out buy the more successful ones, but that's the market cycle as it's always been.
Even Ponzi's ventures eventually ran out of money and collapsed. This internet bubble is no different.
"If one is really a superior person, the fact is likely to leak out without too much assistance" -- John Andrew Holmes
I think that anyone who didn't realize that the bottom was going to fall out of the tech stock economic boom is a fool. The only question now is whether they can level off their business or if they are going to crash and burn.
I particularly liked the absurd sites that I have seen advertised such as snowball.com which are spending on tv advertising even, but they literally have no product to sell.
I frankly don't need to look at a million and one websites a day where I get some news and a bunch of random people post their opinions. Oh wait a minute...
Seriously though, I hope Amazon.com and CDNOW.com both do bottom out and end up giving me some really good deals. There's nothing like taking advantage of someone's misfortune.
Investment fads come and go. Biotech had a similar boom in around 1990-1993 and then the bottom fell out of the market when the internet came along. Guess what, venture cap has started to subside for web site companies after people realized that clickthroughs give very little sales and that some of these companies are sooooooooo overvalued that even if their wildest predictions of future growth came true, investors would loose.
Has anyone noticed that the biotech sector has enjoyed a huge boom in the last few months? Could that be due to the beginning of a dot.com bailout?
I bet you Warren Buffett and Alan Greenspan are still considered financial wizards in 15 years.
I'm not saying that all dot.com's are doomed, just most of them.
no sig.
Hotjobs.com, one of the companies that spent a chunk of change on superbowl ads also is broke. What they decided to do about this is venture into the brick-and-mortar and have real live career fairs in major US cities for employeers who want to place facies to these online resumes. Hotjobs claims that these career fairs bring it in quick cash infusions of over $100,000 and help with the lost superbowl cash. It seems that lots of dot comms may have to rethink their internet only strategy or vary their business model if they do not plan to crash and burn.
Mark my words, the Ponzi scheme (named after Charles Ponzi, a swindler in the 20s who robbed from Peter to give to Paul - ie one investor to another - slightly different from a pyramid scam in that it isn't necessarily hierarchical) will be renamed the Amazon scheme soon enough.
My only fear is that this eventual return to market sanity will precipitate a major crash. Most other industries are reasonably valued, having suffered from a hidden bear market as all the money has gone into tech. But a mass rush from tech may not necessarily go back into value companies (ie those with profits).
Keep your eyes open folks, and hope that your online broker's servers are up for the stampede, when (not if) it comes.
GdI
The bottom line is that there are some fundamental rules by which companies can be evaluated, the bottom line, the revenu, the growth rate, ability to pay all the outstanding bills at the end of the year, etc. Some dot coms just don't show most of those qualities and investors are tired waiting.
BTW did Amazon come up with some 10 years plan for revenues? That's what Fred say, the Amazon is saying that in 10 years they will be profitable, and this is in the time when billions of dollars appear and disappear over night!
Did you know that dot coms constitute over 8% of all business trades on the Wall street? That's over 1.1 trillion USD. Huge bubble!
You can't handle the truth.
This market is no different, and its a healthy process.
As it stands, AOL and Yahoo are flush with cash, hence they stand poised to be the consolidators, not the consolidatees.
This doesn't mean that the internet shopping revolution is stopping, far from it, it just means it is going to enter into a new and more mature phase. We are going to see the thinning out of the millions and millions of net companies until only the ones that actually provide valuable services and turn a profit remain. Personally, I'm looking forward to it.
OOG NOT SURPRISED!!! ECOMMERCE HYPE, AS ARTICLE SHOW!!! OOG SEE BEHIND FLASHY ADVERTISING AND PROPAGANDA!!! COMPANIES RIDING ON ECOMMERCE WAVE, HAVE NOTHING TO BACK UP INVESTMENT!!! OOG PREDICT FULL INTERNET SHOPPING AGE NEVER HAPPEN!!! INFLATION AND GOOD ECONOMY MAKE IT LOOK POSSIBLE, BUT OOG SEE BAD SURPRISE IN FOR COMPANIES!!! FOR EXAMPLE, AMAZON IN RED DESPITE CLAIMING LARGE PROFITS AND EARNINGS!!! OOG LAUGH WHEN ONLINE SHOPPING COMPANY FAIL!!! OOG BREAK HEAD!!!
However, Pegasus seems to have overlooked some fairly important issues. Chiefly, investments. Most companies avoid keeping massive amounts of cash on hand simply because it's much better off invested in the stock market. See, for example, VerticalNet 's response. When investments are taken into account, at least some of the companies are much better off than the study suggests.
This is another example of non-news, of an old blue-blooded publication pooh-poohing the high-growth economy of the Internet.
Net firms are DESIGNED to run out of money. Here's the way it works. VC's give ten companies ten million dollars each. They companies spend it as fast as they can, provided they get some results for it, and it's off to the races. Of course, startups pace their spending, but if they give themselves a year's cushion of cash, development will suffer and they'll fall behind. Of the ten companies, maybe one will reach maturity before it runs out of money, will go public, and will pay off the investors way better than 10-1.
Amazon could be making a profit today if they wanted to, but they're still spending enourmous amounts on promotion. Folks keep sayting that some sort of bubble is going to burst, but that's not quite accurate. Growth WILL slow down one of these days, though, once we reach a certain point of saturation. When that day comes, many companies will see their stock drop through the floor, and they'll be acquired for pennies by the big fish. With fewer startups nipping at their heels, the leaders like Amazon will reduce spending on promotion, and they'll start to show profits.
Net companies are losing money. So what else is new?
The article claims that Amazon is going to run out of money in 21 months. IFF they don't raise more capital before then. Has amazon *ever* been more than 21 months away from bankruptcy? This is the company which used the 'net 60 days' payment scheme to provide almost all of its working capital for a significant part of its lifetime. I'm certain that it was closer than 21 months away from insolvancy back then.
Yes, if all the funding dried up immediately those companies might be in trouble. But the funding isn't going to suddenly dry up, and even if it did, those companies would easily have enough time to change their business practices (ie, raise prices) so that they could stay afloat.
Tarsnap: Online backups for the truly paranoid
VA Linux has about $130 million in cash less liabilities, and they're losing money at an annual rate of about $46 million. (This is computed as 4x the most recent quarterly figure.) So they're in good shape in the cash department, and have two or three years to become profitable. Yes, the stock is tanking, but they have the money in the bank. This gives them some staying power.
Red Hat is in good shape, too. They have around $88 million in cash less liabilities, and they're losing money at around $14 million a year. So they have a few years if they don't overexpand. Red Hat is trying to do a second-round public offering to raise more money, presumably so they can overexpand. When they filed with the SEC for that offering in January, their stock was at 131; now it's around 59. That's an bad situation in which to try another offering, but they don't need immediate cash to operate.
So neither of those companies is going to go away quickly. They're in businesses that don't really take heavy capital investment, after all. On the other hand, as stocks, both are incredibly overpriced, as the market is recognizing.