Monday 5th February 2001 |
Text too small? |
Nearly a year later we've got more internet companies but, as it turns out, our predictions weren't far wrong. New Zealand's recent tech wreck - we lagged behind the US in both joining the dot-com party and suffering the hangover - has seen very few winners but quite a few strugglers.
Among a small number of good news stories, technology distributor Renaissance's share price rose --from 46 cents in January 2000 to $1 at year's end - quite a feat in the present market. How? By being an -old economy company using new economy technology in a smart way. Renaissance is also planning to list Conduit, the B2B software part of the business, on the Singapore Stock Exchange where e-commerce is still -hot.
It's much easier to find the bad news. Local technology stock index DF Mainland lost 30.8% of its value by Christmas (the Nasdaq dropped nearly 35%) and we had a slew of cancelled deals (the merger of Force and Ihug, and Jump Capital's $8 million investment in Wilson Neill's high-speed wireless subsidiary Radionet, to name a couple).
New Zealand's tech wreck has hit both locally grown internet companies and foreign interests that expanded here. But it is some of the local ventures - the auction site TradeMe, the e-commerce music site mp3.net.nz and the news sites Scoop and Newsroom - that have achieved at least a modicum of success. What do these sites have in common? Low overheads, long hours, solid brands, and owner-operators with drive.
Grim reading
So what's the proof that New Zealand's tech wreck even exists? Fortune magazine's 2000 dot-com deathwatch stood at a total of 124 US deaths in December, and we haven't had a single slammer of a collapse. Sceptics, take a look at this:
E-Loan was restructured in December into two business units, one for B2B and one for B2C, which will be scaled down after taking on The Warehouse as a majority partner.
Has the pendulum swung too far, or is there still a way to go? DF Mainland tech analyst Bruce McKay thinks the situation will get worse before it gets better, with one or two companies going to the wall, but he tips stock prices climbing by mid-year. IT Capital's Keith Phillips reckons values can't drop any further locally, and says some good companies have been sucked down with the bad. He cites his own company's share price of 19 cents, down from a high of 92 cents last March, and well below the 24-25 cent purchase cost of its assets. Advantage Group's share price fell from a high of $5.65 to just $1.26.
Venture capitalists, waiting to spend their money, are looking beyond sexy to solid. "It's not rocket science. We're looking for businesses that can generate reasonable margins from the products or services they're offering," says Wendie Hall, managing director of venture capital firm Caltech Capital Partners. In Hall's view, the worst impact last year had on start-ups was the low Kiwi dollar making offshore marketing more expensive.
Certainly no one is writing off the internet. "People are trying to use it more as a business tool than just a fashion accessory," says Ord Minnett tech analyst David Wallace. Investors, nervous after a number of blue chip companies such as Microsoft downgraded their profit forecasts, may be lured back - but this time they're likely to be more discriminating. They want companies with high gross margins or critical mass in their niche.
Renaissance chief executive Mal Thompson reckons there is opportunity for good, solid, well-managed tech companies to do very well. "There is a significant pile of money sitting around waiting to be invested in the right vehicle, but the dot-coms have got a lot to prove after burning a lot of money," he says. "Shareholders now expect a return."
Who do they think they are?
russell_brown@idg.co.nz, fiona_rotherham@idg.co.nz
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