Internet Revolution Has Just Begun

I saw another column elsewhere in cyberspace Wednesday that asked this
provocative question: “Is The Internet Revolution Over?”

Without saying so, the author seems to suggest as much, citing as
evidence the large number of Internet companies losing money, market
capitalization and, possibly, any hope of surviving.

But the market always has expected there to be more losers than winners
in the Internet economy. For every eBay (EBAY),
there are dozens of other auction sites gathering cobwebs and bleeding
money. E-tailers alone face fierce competition and razor-thin margins;
there will be many casualties in that sector.

Even companies in the so-called “hot” sectors are not immune from
adversity. Shareholders of infrastructure player Ramp Networks (RAMP)
got an unpleasant surprise on Oct. 22 when RAMP shares plunged 52% after
the company announced a net loss that exceeded analysts’ estimates. That
same day, Sycamore Networks (SCMR),
a provider of optical networking products, made its ticker debut,
finishing up 386 percent from its hefty $38 offer price.

None of this, however, means that the “Internet revolution” is winding
down. I think it is still in its early stages, and I subscribe to a
theory held by Geoffrey Moore, co-author of the excellent high-tech
investment book “The Gorilla Game.”

At an investment panel at Fall Internet World ’99 in New York, Moore said,
“The Internet, as a generic category, is still undervalued and will be
for years. But the Internet, as individual stocks, is temporarily
overvalued and there will be a correction in the near future.”

The correction Moore mentions likely will be a series of small
corrections instead – the kind we’ve seen several times since last fall.
They will be good for the Internet economy, because they will sort out
the pack and bring overvalued stocks back to earth.

And for wise investors, they will represent further opportunities to bet
on a technology that is only beginning to transform the global economy.
The revolution is far from over.


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