The New Economy slow-down

Companies are leaking memo in an effort to boost stock prices, start-ups postponed IPO or prolonged "stealth" period. There are few bright spots as IT companies head toward a downturn.

One week into the new millennium we are deluged with reports of the slowing economy and its innumerable ramifications - corporate spending cutbacks, dot-com shutdowns, underwater stock options, and so on. In recent weeks, Microsoft, Sun and Hewlett-Packard all have tried boosting their stock prices by leaking internal memos from their CEOs calling for belt-tightening, and many start-ups are proud to point out that they've postponed their IPOs.

Stealth modes - those periods when a start-up acknowledges its existence without having to publicly justify itself - appear to be lengthening. Model N - a B2B infrastructure start-up I called out in September for hyping itself - has now postponed its launch until next spring, although the company claims to be on plan and retains a mysterious ability to attract press coverage.

Amid all the posturing and hand-wringing, who really is doing well? Evoke Software claims to be. CEO Lacy Edwards brags that his company has closed a series E mezzanine round of $25 million with no Internet strategy, despite pressure from investors last summer to come up with one. When pressed, Edwards acknowledges that he is dissembling slightly.

Evoke makes software for migrating and managing corporate data and is working on a strategy for handling data flowing through B2B exchanges when those exchanges become "real," he says.

Indeed, Gizmo.com, a B2B marketplace linking buyers and sellers of used computer equipment, has vanished. Gizmo.com pitched itself to "The Incubator" last May as a company that would survive and prosper in the wake of April's sharp stock market correction, but its Web site is gone and e-mails sent to the CEO are returned as undeliverable.

And Evoke Software unfortunately has not escaped the fallout caused by the rampant growth of the Internet. The company sued Evoke Communications for trademark in fringement. The latter, a Web-services company, secured and is trying to brand the url www.evoke.com, causing a federal judge to issue a preliminary in junction halting its advertising. Both companies recently changed their names to Evoke, and Evoke Communications went public. A trial is set for May.

Another start-up claiming a bright future is DiCarta, which makes contract management and negotiation software. The company in November backed off from a pure hosting model "to achieve more rapid profitability" and is striking partnerships with vendors like Ariba to embed its software as part of a larger supply chain. CEO Scott Martin, who began his career on Wall Street in 1980, says companies in 2001 had better be solving real business problems. "If you're a company providing a nice-to-have software solution, you're going to have a tough 2001," he asserts.

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