Is the New Economy About Products, or Shares?

HONG KONG (05/05/2000) - Does the customer matter anymore? A look at local Internet start-up companies makes me think that the answer is a resounding "No, not really."

Many companies seem much more concerned with planning for their initial public offerings (IPOs) and the windfall that investors and employees will reap than they are with minor details like customers, products, and (of course) profits.

Eventually, this is going to come back and bite these companies in the ... well, you know where.

Unfortunately, those that are going to suffer most when the proverbial poo hits the fan aren't necessarily the founders or early-stage investors in these companies but individual investors that bought into the hype surrounding local Internet companies.

That's too bad. Because it doesn't seem that anyone in a position of authority is looking out to safeguard the interests of small investors. To inject a healthy dose of reality into the markets, I'd like to see the stock exchange officials stop issuing waivers to any Internet company that wants to go public.

I absolutely do not buy the argument that waivers are necessary to attract companies to list in Hong Kong. After all, a company that needs a waiver or two to list on the Growth Enterprise Market would hardly seem able to successfully list on a more established market such as Nasdaq.

In addition, officials must come down hard on companies and individuals that violate exchange rules - whether the violation is intentional or not.

Take for example, last week's report by Reuters that Hongkong.com Ltd. director Peter Hamilton violated exchange rules by buying shares within one month of the company announcing its quarterly financial results.

I've met Hamilton before and find him to be a stand-up guy. And there's absolutely nothing I've seen reported in the press that would lead me to believe he was up to anything shady when this purchase was made.

But still, honest mistake or not, the exchange must come down hard on these types of violations. There's absolutely no conceivable excuse for the director of a listed company to not be familiar with exchange rules. The penalty should hurt - bad.

But while exchange officials seem reluctant or incapable of straightening things out, market forces may be able to do the job for them. Recent IPOs by companies such as techpacific.com Ltd., Asiacontent.com, and iSteelAsia have all tanked.

The unwillingness of the market to vault the price of these companies' stocks into the stratosphere is an encouraging sign. Hopefully, examples like these and ongoing market volatility will help to separate the wheat from the chaff.

Or at least cause investors to take a more cautious approach to investing their money in Internet-related companies.

Already, some companies have shelved their IPO plans.

ColbyNet Ltd., for example, last month announced it would postpone its IPO after observing how badly some Internet stocks have been getting spanked lately. Smart move on their part. Taking the company's online presence public at this stage would have amounted to a cynical exploitation of market sentiment. Of course, their stock price would have sunk the moment trading started.

Wonder why? Check out the Web site. If you find anything that remotely resembles a product or service, please drop me an e-mail. I looked and looked but found nothing but marketing fluff.

While ColbyNet keeps their listing plans on the back burner, let's hope they actually come up with something a bit more solid to offer potential customers.

Which brings me back to my original point. Does anybody care about the customer anymore? Or is the New Economy all about exploiting investors in a bid to line the pockets of founders and investors?

Most of the activity I see seems to involve peddling shares to potential investors, regardless of what a company may think that its business is.

Even established technology companies are doing this. Take networking giant Cisco Systems Inc. as an example. The company has aired a series of television advertisements with cute-looking kids from around the world asking "Are you ready?"

Yeah, right. Ready for what? Ready to invest in Cisco stock? Or ready to buy that enterprise-class router I've had my eye on?

When you've got the kind of revenue coming in that Cisco has, a touch of vanity can be forgiven. The company can afford to pump money into a mainstream ad campaign without hurting its efforts to keep pace with customer needs.

And then there's someone like techpacific.com, who has been running bus ads asking you to send in your Internet business plan. While they promise not to laugh, I've heard plenty of chuckling from industry observers who've watched this company go public.

Why would a company like techpacific.com, which is designed to incubate start-up companies, need to run an ad campaign on the side of a bus? Is it because the staff is too lazy to get out and pound the pavement looking for good investment opportunities? Or is it because venture capitalists are having such a hard time attracting business plans?

Maybe it's neither.

Maybe the whole ad campaign was an attempt to pump up recognition among investors before their IPO. If so, it didn't seem to work. The day they went public, the stock plummeted.

Back to the drawing board, I guess.

If I were starting a company, I wouldn't be interested in working with a company that fritters its money away on glossy ad campaigns. That money could be better spent funding my company and developing products and services that meet my customers' needs.

The same goes for any other IT product or service I purchase. I want to know that the company that I purchase from is committed to keeping pace with my needs and my demands. When it comes to boosting their share price, I couldn't care less.

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