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2HRS2GO: Private firms command the Next Generation

    SAN FRANCISCO -- There are Internet companies and then are Internet companies.

    Internet companies, we've all heard about. We heard about their rise two years ago, their Wall Street hype last year and their stock market collapse this year. The content providers, the e-tailers, the dot-com this and dot-com that -- their 15 minutes have come and gone, a few leading names excepted.

    Those sectors have been replaced, in hype if not necessarily in total valuation, by the Internet companies. Companies that optimize network performance. Vendors who sell software that helps you sell better. Billing applications. Tools upon tools upon tools.

    You won't find a better microcosm of the phenomenon than this week's Robertson Stephens gathering at The Ritz-Carlton Hotel, which seems to host most investment conferences in San Francisco. Robby Stephens calls it "The Next Generation" of Internet companies, and the investment bank has booked its presenters to match that theme, judging by the large number of private companies available: of the 275 companies appearing, 48 percent aren't publicly-traded, making this show about as Next Generation as you can get without inviting Patrick Stewart to appear as Jean-Luc Picard.

    Presentations take place in four "Salons", as well as the hotel bar and dining room. Salons I and II are the biggest, III and IV are smaller rooms. The first two usually host more prominent companies such as eBay (Nasdaq: EBAY). The latter two normally seem to house a string of Companies That No One Except the CEO Cares About.

    But that seems to be a little different this time around.

    BlueKite.com, a private firm, drew more than 60 people yesterday to fill the Salon IV. You probably never heard of BlueKite.com, but you surely will when it goes public, because it targets the hottest spot in technology these days: wireless bandwidth.

    The company claims its client-server product reliably boosts wireless Internet access speeds by as much as five times, works on all devices and complements other network products such as the caching technology of Inktomi (Nasdaq: INKT). BlueKite wants to be in position to file an IPO prospectus by year's end, CEO David Cox said.

    That kind of talk gets fund managers excited.

    On the other hand, a company far more prominent in the news, with an outspoken CEO and a string of heavyweight backers could barely stifle a yawn from the sparsely filled Salon II yesterday afternoon. Divine Interventures (Nasdaq: DVIN) might be an investor in Internet firms -- 70 percent of its investments have gone into online business infrastructure providers -- but DVIN itself elicited little interest from the conference crowd.

    Divine CEO Andrew Filipowski seemed slightly more subdued than usual, but it didn't stop him from touting a "world-class board of directors" (as if other incubators don't have one?) and suggesting "liquidity events" -- an IPO or merger and acquisition -- soon to come for at least three DVIN companies. The crowd wasn't impressed: shares of DVIN are down today along with the rest of the Nasdaq Composite Index. Incubators are passe in the eyes of Wall Street these days.

    The level of disinterest extends even to Big Names. eBay addressed an decent-sized crowd in Salon I this morning, but how many of them were paying attention? I sat in a row with seven others, four of whom spent most of their time leafing through the conference booklet to read about other companies. The guy on my right seemed far more interested in perusing a description of Purchasepro.com (Nasdaq: PPRO) than in hearing eBay CFO Gary Bengier.

    Perhaps it would help if eBay said something new or interesting, but it never seems to. I've heard eBay executives give investment conference presentations several times over the last two years, and the company seems determined to give out little more than a description of its business. As if people in the audience didn't already know what eBay does.

    To be fair, few people go to these shows expecting any revelations; even the post-presentation, client-only sessions closed to the press almost never produce any stock-moving revelations. These investment gatherings are basically an expensive way to feel reassured about your investments, renew acquiantances, shake hands and exchange business cards.

    The exceptions, of course, are the private companies and the smaller public firms, which offer the more interesting -- albeit riskier -- Internet opportunities. The established companies, the big names and the prominent players are just there to draw the crowd.

    Other conference notes:

  • Global Crossing
  • (Nasdaq: GBLX) drew one of the largest crowds yesterday, with more than 100 people filling and spilling out of Salon III. "I wish I was announcing Digex (Nasdaq: DIGX) today," CEO Leo Hindery noted, adding that he had two different versions of his speech ready, just in case.

    But other than acknowledging the interest in Digex -- whose controlling stakeholder was bought by Global Crossings rival Worldcom (Nasdaq: WCOM) -- Hindery merely gave another generic speech about Internet growth spurring network expansions.

    The former cable executive did provide an argument against fears of broadband monopolies: "Residential (Internet) access is the next great commodity. It may be a commodity today ... There are six ways to your household today, and if you don't like those six, I'll find another six."

    The commodity nature of consumer service lessens its appeal, which is why Global Crossing (like Worldcom) prefers to focus on corporate clients. "We weren't built for millions of customers, we were built for thousands of customers," Hindery said. "This wasn't built for voice, this was built for data."

    About 59 percent of Global Crossing's revenue now comes from data transport, Hindery said.

  • SmartForce
  • (Nasdaq: SMTF) CFO David Drummond reiterated previous expectations, which include full-year revenue ranging between $150 million and $160 million for the vendor of online training software and services. The company sees a year-end backlog of $250 million, and should approach break-even by the fourth quarter, Drummond said. 22GO>