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What to expect in the year 2000?
In my opinion, it's inevitable that we will enter back into the next cycle and see another correction and a great aftermarket buying opportunity.
More than ever, we are seeing investors buy into themes. With companies going public in earlier and earlier stages of development and sophistication, with little market history, or even without any kind of history at all, it will become tougher to analyze the prospects of any specific company.
Most will have rapid sales growth off a small base and a large loss growth. Some of them are onboard to become the next blue chips, five or ten years down the line. But it will be more and more difficult to figure out which are the chosen ones.
Buckshot approach
To make up for lack of analytical focus, investors will be bidding up the entire sector. The most popular buzz words during the second quarter of 1999 were Business to Business (B2B), network equipment, IP telephony, and e-business software. I think it's a safe bet that the enthusiasm for these sectors will remain unflagging for much of 2000. Because the Internet provides unlimited opportunities.
Find fortunes or flip burgers
Five years ago, virtually no major business had online advertising. Madison Avenue ad agencies laughed at the very idea. Today, every major ad agency has an interactive advertising group. Spending for Internet advertising is already in the hundreds of millions of dollars.
An independent media research firm estimates that by the year 2000, that number will balloon to over US$4 billion.
The greatest investment opportunities will be in the companies best prepared for the shift from nation-state to cyberstate. Not all companies are. And that's where the future of commerce will be.
Yesterday's car and encyclopedia salesman are well advised to brush up on the art of flipping burgers and pouring shakes. Because 47 different kinds of cars--from Ford, Chrysler and GM, as well as Toyota, Honda, Saab and Subaru--are now advertised and buyable online. You can do all your buying research without ever visiting the dealership. Meanwhile, you can fit several hundred volumes of interactive live sound and video encyclopedias on a US$19 CD. And you don't need shelf space to store it.
Age of opportunity
Imagine running a sales-based business that doesn't require inventories and involves no aspect of the physical transportation of goods. Marketing, production, shipment, delivery and payment can all be taken care of efficiently and quickly from your home office. Even better, there are 60 million potential customers at your fingertips.
For Internet companies, the New Millennium is the Golden Age of opportunity. All components of the vehicle that will take many of them to new levels of individual and financial independence already exist.
E-business needs a little help
The use of the Internet to communicate and conduct business is increasing rapidly. Companies are accelerating their movement to the Internet to capitalize on new business opportunities, reach broader consumer audiences and reduce operational costs. IDC estimates that spending on software applications and services for e-commerce alone will grow from US$7.8 billion in 1998 to US$53.8 billion by 2002.
To compete online and to capitalize on Internet revenue opportunities (not to mention building strong shareholder value), businesses must build a distinctive presence on the web and continuously maintain and extend that presence. Accelerating time-to-web is essential to attracting customers and generating revenue opportunities.
Just as television stations create consumer loyalty with programs, web sites must do the same. Web content has to be accurate and rich to discourage web surfing. But in providing services such as frequent content updates, high-resolution graphics, audio segments, video clips, and hyperlinked text, the site has created a strong need for content management solutions. IDC estimates that the web development life-cycle management software market will grow from US$76.4 million in 1998 to US$1.6 billion in 2003.
As markets become increasingly global and enterprises become increasingly decentralized, the business environment demands a more tightly integrated network of supplier, customer and partner relationships.
Real-time exchange of information across the enterprise can enhance management and employee productivity, create manufacturing efficiencies and improve customer service. For example, real-time information exchange with suppliers and customers expedites order fulfillment, permits just-in-time inventory management, enhances sales opportunities through direct customer interaction and facilitates the implementation of e-business solutions.
Cost of doing business
Creating a real-time enterprise through technology is complex. The range of computing environments and software applications utilized across the typical business organization is vast and growing. Organizations are incorporating powerful new enterprise software while seeking to take advantage of their prior technology investments. All of an enterprise's systems and applications must be tightly integrated in order to manage, grow and extend the enterprise. So look for more E-business software and network equipment IPOs in the year 2000.
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