Worse than you think

Trouble is, the bottom is nowhere in sight. The picture for investors will get worse before it gets better. Much worse. Look at the healthiest parts of the new economy and judge for yourself.
Written by Taylor , Contributor and  Jerome , Contributor
Still woozy and wobbly, you struggle to your feet for another round in the tech-stock slugfest. You're in worse shape than you realize. The much-awaited bounce-back hasn't. And while helmet-haired commentators on cable chirp optimistically about the coming tech-sector recovery, we've got some bad news to deliver: The worst is yet to come.

Hard to believe, isn't it? A six-pack of cheap beer costs more than the average share price for your favorite tech stock. Dot-com deadwood continues to burn. Only four Web companies have gone public this year—1/20th the number that had IPO'd by this time last year. Talent is fleeing the Internet. So are entrepreneurs.

All this gloom should make for a bottom-feeder's banquet. Trouble is, the bottom is nowhere in sight. We hate bad news as much as you do. But the picture for investors will get worse before it gets better. Much worse. Don't take our word for it. Look at the healthiest parts of the new economy and judge for yourself.

NorthPoint Communications stranded more than 100,000 users in April when it tanked. Flashcom and Winfire preceded it, despite millions of dollars in venture capital that couldn't save either company. Covad and Rhythms NetConnections are currently on the rocks. In fact, the only DSL providers that look viable are the phone companies—Pacific Bell, Qwest, Verizon, and AT&T, in particular. Would you care to look at the debt these companies are carrying?

Application Service Providers
Billions in venture capital poured into this sector, thanks to a couple of over-the-rainbow market studies. Turns out the authors of these studies made a few oopsie-boo-boos in their projections. The casualties: HotOffice, Pandesic, and Red Gorilla are already toast. USinternetworking can't seem to burn money fast enough. And the few ASPs still standing—Salesforce.com and Employease come to mind—will probably become a tasty lunch for giants Oracle or PeopleSoft.

B2B Exchanges
Talk about a mess. There's a glut—more than three dozen exchanges for the chemicals industry alone. None of them work particularly well. And company managers are increasingly reluctant to pay a middleman for transactions that can be managed directly. It's no wonder that Wall Street darling Ariba has seen its stock price plummet. Ditto Commerce One and VerticalNet. And Ventro closed its Chemdex marketplace after its share price dropped from a high of $244 into penny-stock territory.

Peer-to-Peer Networking
The magic behind Napster, P2P networks promised to empower an entire new paradigm for Web businesses (read: fad). Popular Power imploded last March. That same month, InfraSearch, whose founders once boasted that P2P would be as important as the telephone, was sold to Sun Microsystems at a fire-sale price. Sun promptly dismantled the company and stashed its parts into various back-office research departments.

Consumer Services
Maybe they just ran a tad ahead of the market. Whatever killed them, investors won't be back until the market has caught up. Adios, Kozmo. Ta-ta, Eazel. Sayanora, Mortgage.com. Rest in peace, Webvan.

Internet Devices
Web phones didn't ring in the only sour note for this category. Netpliance closed the moment investors flinched. 3Com and Compaq have dumped plans to ship Web appliances. And Larry Ellison's New Internet Computer company hasn't sold enough units to network a German oompah band.

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