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THE DAY AHEAD: Many more Value Americas to come

For the last year, Value America (Nasdaq: VUSA) has been ahead of its time for all the wrong reasons. It was among the first e-tailers to signal problems ahead with a restructuring in December 1999. And now it's among the first public dot-coms to reach the bottom of its death spiral.

Value America last week said it filed for bankruptcy and shuttered its e-tailing operations. Trading of Value America was halted Monday because the Nasdaq wants more information on the company's alleged e-services transformation.

For the record, Value America said it is transitioning to sell its back-end e-commerce infrastructure and services. The company said it showed off its e-services business plan to rave reviews. Value America said its bankruptcy would be different from other dot-com proceedings because its e-services business would emerge to save the company.

Yeah right. Think about it: Would you buy services from a company that has already imploded once in e-commerce? Didn't think so. The company is cooked.

But instead of focusing on the usual dot-com obituary, the final demise of Value America should be viewed as a positive in the big picture.

So why is the demise of Value America a good thing?

It signals the end for many companies that shouldn't have gone public in the first place. A few months ago, I opined that "Band-Aid financing," funding that only postpones the inevitable, was a bad thing. Now even the Band-Aids are coming off.

As Value America and other dot-coms take the steps to oblivion -- initial restructuring, last-ditch financing, then bankruptcy or takeover -- the glut of shaky Internet companies clears. That will allow Internet companies with the real fundamentals to move on. Yes, there are Internet companies, even e-tailers, that may be worth your time. Unfortunately, there are a lot more Value Americas out there, and many companies such as PlanetRX (Nasdaq: PLRX) are still in the life-support funding stage.

Despite the life support attempts, the endgame could actually be over by the end of the year.

Of course, you should feel for the folks who lost their jobs, not to mention those individual investors who were snookered into buying shares. But don't waste your sympathy on company officers, investment bankers, venture capitalists and others who brought Value America public and then pushed shares. In fact, we hope Value America's largest investors, who threw in even more money to revive the company, learn an investing lesson.

What's changed?

The imploding dot-com syndrome has already changed the market for technology companies. Here are a few of the changes:

Venture capitalists and investment bankers are allegedly pickier. VCs acknowledge that they are to blame for the recent Internet woes. They got greedy and brought too many premature companies public. Gee, thanks for the update, guys.

Common sense hits IPOs. The premature companies can't go public these days. And that's a good thing. Investors even sent CMGI's (Nasdaq: CMGI) AltaVista IPO back to the drawing board. If the companies go public, there are no guarantees that investors will buy them. For every successful IPO, three flop.

Analysts are toning things down. When Henry Blodget, Merrill Lynch's resident Net bull, downgrades a bunch of companies, you know the days of wild speculation and not-so-educated leaps are over. Blodget, however, isn't alone. Many analysts are dropping dot-com coverage and toning down price target guesses. TDAIN
• Nasdaq halts trading of Value America
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