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Business plans to upstage ideas at Net trade show

Internet World takes off this week with a more somber note than in years past: The optimism of the Gilded Age will be replaced by a pragmatic search for profits and enduring business models.

What a difference six months makes.

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Internet World serves international flavor
Hari Sreenivasan, CNET News.com senior correspondent
Internet World, the high-glitz trade show for Net companies big and small, takes off this week at the Jacob Javits Center in New York with a more somber note than in years past: The optimism of the Gilded Age during Spring Internet World will be replaced by a pragmatic search for profits and enduring business models.

Industry bigwigs slated to deliver keynote addresses include Larry Ellison, chief executive of Oracle; Barry Schuler, president of the interactive services group at America Online; David Wetherell, CEO of CMGI; Paul Otellini, executive vice president at Intel; and Bill Gross, CEO of Idealab.

Internet World was conceived at a time when venture capital still flowed more to ideas than to business plans with scheduled timelines for profitability. The event has traditionally been a showcase for small companies looking to get their names on the Internet road map.

The once high-flying Internet sector has taken its hits since the last Internet World in April. The stock market tumbled about a week after that event. During the past six months, the ripple effect has spread from online retailers to Web content and into the seemingly untouchable stalwarts of high technology.

Internet companies are dealing with the sobering realities of layoffs and yanked public offerings. Investors once concerned with revenue growth have shifted their focus to profits--and many young companies have been unable to shift gears fast enough to keep their stock prices from tumbling, often to below $1 a share.

"I think that a heavy dose of realism has been introduced," said Derek Brown, an equity analyst at WR Hambrecht, reflecting on the past six months. "That realism has impacted every company, whether online or offline, about the potential and challenges of the industry as well as the continued opportunity of it."

The shifting fortunes of the Net economy are reflected in the lineup of keynote speakers scheduled for the conference: Of the six, three have run into serious headwinds in recent months.

AOL's Schuler is scheduled to speak Wednesday. After announcing its intention to acquire media giant Time Warner in January, AOL is still trying to get the necessary regulatory clearances to close the deal.

The company's share price has dropped about 25 percent since Spring Internet World, as investors have become concerned about tech shares in general and AOL's valuation in particular. Although the combined AOL Time Warner would become a technology and content powerhouse, investors began marking down the shares immediately after the merger was announced on worries that AOL would no longer be a "pure-play" Internet company that justified a lofty stock price.

Also scheduled to deliver keynotes Wednesday are Intel's Otellini and Oracle's Ellison.

Oracle's shares have held up remarkably well this year compared with those of many other companies. Since Jan. 1, shares of the database software maker are up 20 percent--although in the past month they have slipped about 15 percent.

Intel announced in late September that revenue would miss expectations by 3 percent to 5 percent. The shares sank more than 20 percent overnight on the news, shaving off about $80 billion in market capitalization and sending a shudder through the entire PC sector.

On Thursday and Friday, the gloom will once again be evident as chief executives of two companies that invest and nurture Net start-ups take the stage.

CMGI's Wetherell leads the Internet holding company, which has seen its shares tumble 87 percent this year. The problem: CMGI and similar companies fund and develop Internet start-ups with the payoffs coming when the companies go public or are acquired.

That strategy paid off handsomely when investors were eager to buy shares of many young e-commerce and content companies, helping send CMGI shares to a 52-week high of $163.50. Since the dramatic stock market tumble in April, however, investors have lost their appetite for IPOs by many tech companies--and even for companies that have already gone public. CMGI now trades around $17.

That same pessimism forced another so-called Net incubator, Idealab, to postpone its own IPO last week.

"Over the past several months, we have seen dramatic shifts in the market and determined that it is in the best interest of the company, its employees and investors that we not proceed with the offering during this volatile time," Idealab's Gross said in a statement last week.

Gross takes the stage at Internet World on Friday.