Jane Wakefield: The dotcom fairy tale is over

Last week Yahoo! was compared to Humpty Dumpty, the clothed egg of the nursery rhyme who fell off the wall while the army looked on. Yahoo! has sat equally precariously on the dotcom wall but it has made money and it has been there a long time so others look on it more as the Grand Old Duke of the Internet. But just as the average three-year-old doesn't stop to question why an egg is wearing clothes and sitting on a wall in the first place, so no one has questioned Yahoo!'s place on the wall or the idea that all dotcom's would eventually make money.

Now Yahoo! has tumbled, that is no longer the case. If ever there was a barometer of the highly unpredictable dotcom weather it was Yahoo!, a highly successful Internet company which proved that you could make a profit on the Internet. Its sheepish admission that it won't make any money this year has put an end to that optimism and is even more alarming given that it made nearly $300m (£205) last year.

Now the barometer is firmly stuck on storm mode and it is anyone's guess who will weather the latest tech tempest. While the smaller players have long since been cast overboard on the Internet's Titantic, even those more determined companies that have been clinging white-knuckled to the side are beginning to release their grip.

It was clear that some dotcoms would never make it. Those offering mail order face masks from Guetamala or Web link-ups with your bank manager were clearly non-starters. But if the the dotcom generation was good at one thing, it was persuading investors that a site selling paperclips was a good idea.

They learnt the marketing non-speak of American executives and managed to deliver Powerpoint presentations full of sound and fury but leaving audiences with no idea what their idea (dotcommers always had ideas not products) was and how they intended to deliver it. Image became more important than substance. A jazzy Web site run by a 12-year-old became the talk of previously staid stock exchanges, investors rushed to them with wheelbarrows of dollars and everyone laughed when it was announced that Amazon had failed to make any money AGAIN.

It has been described as the biggest and silliest party in tech history and now the dotcommers are suffering from one hell of a hangover. Time to stumble through the debris, with a pack of monkeys hammering in your head and pick up the ashtrays and throw away the stale champagne. This will be immensely disappointing to tech journalists who have thoroughly enjoyed the parties and free champagne of the last two years. Now a dotcom party is more likely to smell of desperation and offer you a single glass of Blue Nun.

The storm clouds have been threatening for some time now but what is really worrying is the fact that the old school players, the telcos, the network providers and the hardware manufacturers are also now getting wet. Intel has cut 5,000 jobs and Cisco is planning to slash five percent of its work force. Both play this down and claim the losses will be accounted for in "attrition", a word I interpret as meaning voluntary reduncancy. If Intel can persuade 5,000 members of its workforce to leave voluntarily then I worry what kind of regime they are operating. I wish to God that when it is clear there are problems with these huge empires they would at least have the decency to say so and not try and confuse the staff they are about to sack with meaningless buzz words.

The thing that upsets me about the downturn in the new economy is its slow inevitability. Everyone knew the bubble would burst but secretly I was hoping it would be as dramatic as the Wall Street crash of the 1920's (without the dead bodies of course). It was far slower and less surprising than I imagined it would be. There was less panic and more gloom. Whatever it wasn't (profitable, sustainable, realistic), at least the golden days of the new economy were exciting. The people that created it, like Yahoo!'s race car and guitar fan Tim Koogle were characters and although the word 'visionary' was bandied about far too much there was a lot of original thought -- not just about business but about the economy and society as a whole -- that was carried in the passion that the dotcom wave created. Even the Chancellor was full of the glories of the digital economy in past budget speeches. This week he didn't mention it.

The dotcoms will be back but the scene will never have that mad edge it had in the beginning and I for one will miss that. Of course the tech market will, unlike Humpty, pick itself up and put itself together again, but what shape that will take is anyone's guess. One thing is sure -- no-one in the future will assume that Humpty will stay on the wall.

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Stocks may be down, but don't count them out just yet. Steven Vaughan-Nichols reckons that if the idiots insisting on treating all technology stocks like they have foot-and-mouth disease got over it -- the rest of the economy could start to recover. Go to AnchorDesk UK for the news comment.

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