If the first half of 2000 taught investors anything, it taught them that some businesses flop.
Oh sure, hindsight is 20/20. Any fool can see today that selling goods for less than you paid for them isn't sustainable. In fact, a lot of folks questioned that strategy before, but that didn't stop e-tailing stocks from soaring.
It's also pretty easy to see what business models are out. Business-to-consumer is out of favor, advertising-based businesses are on the fence, and a lot of business-to-business companies will struggle.
It's not so easy to see what models will work. Here are a few business models that are bound to get attention in the second half:
1. XML-based solution providers. Based on the tried-and-true software licensing revenue model, Extensible Markup Language (XML) software providers and integrators could be on to big things. Why? XML is the glue piecing a host of B2B exchanges together. Consortiums are teaming up, but can't get their systems together without XML. Companies to watch include webMethods and Vignette, which recently bought OnDisplay for its XML B2B expertise. Microsoft's latest Web strategy will hinge on, you guessed it, XML.
Bill Schaff, fund manager for the Berger Information Technology Fund, said XML will be a hot sector. His favorites include Allaire and BEA Systems, which he said has been "overly punished"
2. B2B procurement and logistics. Yes, folks B2B will remain hot -- in selected areas. Although industry consortiums and B2B first movers got a lot of attention, Schaff said the real money will be made in procurement and logistics. He said i2, Oracle, Manugistics and Siebel will be on the forefront of making procurement more efficient.
3. Security. On 30 June, president Clinton signed into law a bill that makes electronic signatures as valid as their ink counterparts. The new law, which kicks in 1 October, means many companies will have to beef up security, said Schaff. His favorites include Verisign and Baltimore Technologies, an international security firm.
4. Wireless. Anything wireless will do. MCI Worldcom tried to buy Sprint, and it wasn't because of the long-distance business. MCI Worldcom vice chairman John Sidgmore said roughly 45 percent of wireless traffic will be data by 2003. In 1999, wireless only moved two percent of data.
"Wireless is the next great growth platform," said Sidgmore at a recent investment conference. That means wireless providers, data services companies and equipment makers will continue to be hot. Sidgmore sees the day when voice-enabled browsers will pluck down anything you want from the Net.
5. Broadband gear. The broadband services aren't quite here yet because cable and DSL services are still in the early stages. In the second half of 2000, the companies selling picks and shovels will remain hot.
There's a reason folks are spending billions on revenueless fibre optic companies. It's all about rolling out the next-generation networks. There'll be a lot of winners, including Broadcom, which makes broadband chips, and infrastructure giants including Cisco Systems, Nortel Networks and Lucent.
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