Industry leaders perform autopsy on dot-com bustola

The mood among the tech titans gathered in New York City Sunday night marked a stark contrast from MSNBC’s first Summit, held in February 2000, when the panel sounded more like cheerleaders for the unlimited potential of the Internet. This time, while the execs maintained a positive outlook, they were far more cautious and acknowledged some of the mistakes they’ve made in the past year.

“So many people got caught up in the excitement and the promise of the Internet, ” Gateway (gtw) CEO Ted Waitt said, “that they kind of lost sight of their senses.”

The panelists agreed that Internet stocks were overvalued at their peak, which occurred shortly after last year’s Summit. While they consider their companies undervalued now, they described the market climate as a lot healthier today.

“Why were people, smart people, putting money into things that didn’t have any fundamental underpinnings to them, foundations made of sand, sponge?” host Tom Brokaw asked.

“I think, Tom, they were playing a different game,” said Nancy Peretsman, executive vice president of investing firm Allen & Co. “They were playing the I’ll-invest-and-it-will-go-public-or-someone-will-buy-me-and-I-will-get-out game.”

Brokaw gave Amazon (amzn) founder Jeff Bezos credit for warning investors, during last year’s Summit, not to buy Amazon stock if they were worried about losing money.

“Jeff Bezos, you and I have been playing a word game for the past couple of years,” Brokaw said. “The word games goes something like this: I say, ‘Can you spell profit, I mean P-R-O-F-I-T,’ and you say, ‘Yes, P-R-O-P-H-E-T.’ ”

“The last year, I think, has been a brutal one in many ways,” Bezos said, laughing. “I feel like in one year it’s very easy to go from Internet poster boy to Internet piñata. It doesn’t feel good, but I do think we’re in a much more rational framework now in a lot of ways.”

Many of the panelists took the opportunity to tout their own companies. Yahoo! founder Jerry Yang stressed his portal’s value to businesses; Bezos said Amazon will make a profit by the end of the year; Microsoft CEO Steve Ballmer plugged the company’s .Net strategy; and Priceline founder Jay Walker emphasized his site’s strong customer loyalty. (MSNBC is a Microsoft-NBC joint venture.)

They also did their best to put a positive spin on things, despite the market’s downturn. Yang described this point in the Internet’s life as “the bottom of the first or second inning of a very long ballgame” and said, “We firmly believe that the next 10 or 20 years is going to be just as exciting, if not more so.”

Such comments irritated at least one audience member. Bill Lessard, who runs Netslaves.com, a site for frustrated dot-com professionals, took a jab at the tech leaders when given the chance to ask them a question.

“So far we’re hearing a lot of high-level, highfalutin-type talk here,” he said. “But one thing we need to acknowledge is how truly angry tech workers like myself and investors are. ... Everyone thinks they’ve been victims of a Ponzi scheme.”

What were the biggest mistakes high-tech leaders made in the past year? Here’s what they said at Silicon Summit II:

Amazon.com founder Jeff Bezos: “Investing in Living.com, which isn’t, and Pets.com, which is a dog.”

Microsoft CEO Steve Ballmer: “Not always taking the patience we need on certain innovations.”

Michael Bloomberg: “We didn’t hire enough people.”

Darien Dash, DME Interactive Holdings CEO: "We were impatient last year and we didn’t just focus on getting our products out.”

Sony CEO Howard Stringer: “We should have had 2 million more PlayStation 2’s available before Christmas.”

AOL Time Warner VP Bob Pittman: “Speed. ... We don’t move quickly enough.”

Yahoo! founder Jerry Yang: “Focus on the long term. I think people got reactive in this marketplace trying to see too much that wasn’t there."

Gateway CEO Ted Waitt: “Trying to do too many different things and losing sight of the core basics it takes to make our customers happy.”

Nancy Peretsman, Allen & Co.: “Not acting on what we knew to be true.”

USA Networks CEO Barry Diller: “Not selling all the companies short represented here today, other than our own.”

The panel also tackled a number of Internet-related issues, such as Napster, online privacy, the digital divide, content convergence and wireless technologies.

To illustrate the power of wireless technology, Brokaw showed the audience a Compaq iPaq handheld computer streaming the live broadcast of the show, with Brokaw’s image on it.

Napster on the menu
The panelists then talked about the controversial song-swapping service Napster and the need to find a way for people to download music over the Internet in a way that enables the artists to get paid for their work.

USA Networks CEO Barry Diller pointed out that the recording industry plays an important role in developing and marketing artists and that to simply “cut out the intermediary” was not a solution.

Sony CEO Howard Stringer, who kept the audience laughing throughout the night with a battery of quips, said, “Right now it would be possible for us, and I’ve often thought it would cheer me up to do it, you could dispatch a virus to anybody whose files contain us or Columbia records, and make them listen to four hours of Yanni ... but in the end we’re going to have to get serious about encryption and digital-rights management and watermarking.”

A student in the audience then put Stringer on the spot, telling him he had recently bought a portable digital music player made by Sony that makes it easy to download songs from the Internet. Isn’t it hypocritical of Sony, he asked, to be fighting Napster from its music division and then supporting it by making such devices?

Calling the student’s question a good one, Stringer replied, “At some point, we work it out as we go along. But if we don’t stay in the business, someone else will do it. And there’s a real danger with the margins of consumer electronics companies that Singapore and Korea and so forth will design the machines. So we play defense on the one hand and offense on the other hand. And if it seems a little illogical it’s only defending our turf.”

As the show winded down, Brokaw turned to Bezos and reminded him of his prediction: “Remember, Mr. Bezos, that we have a videotape recording of this that is rolling right now. If we do Silicon Summit III, you’ll come back next year and tell us, ‘See, we did make a profit?’ ”

“That is our prediction,” Bezos said with a broad smile, as the audience burst into applause. “Absolutely. I look forward to it. It’s not a guarantee, but it is our prediction.”