Crash we had to have, but where to now?

Although financial analysts were quick to pronounce the technology bubble "dead", Internet analysts were not so eager to put the final nail in the coffin.

"The types of companies which are suffering most are quite small and are not massive deployers of technology anyway," said Brooke Galloway, senior Internet analyst at IDC.

"Major corporations will continue to roll out technology," she said.

Bruce McCabe, research director at Gartner agreed, saying the technology has merely deflated to a reasonable size.

"There is still an enormous amount of money to be made leveraging technology. The hype has simply been taken out of the stock market for a while, but we can expect the speculative nature of investors to return," he said.

McCabe added this correction was necessary to put realism back into the picture, but added "it's entirely wrong to say it will be permanent. "The IT industry will pick up steam within a few months, but this correction has taken much needed pressure out of the balloon."

And Ian Hunter, Internet analyst at stockbroking firm Hartley Poynton, concurred, saying: "In general, technology is not going to stop being the fastest growing sector of the market."

Which leads to the unanimous opinion that the coming months may see many acquisitions as companies take the opportunity to buy talented but troubled start-ups.

Big fish gobbling up tiddlers

Although the past few years have been characterised by a number of spectacular acquisitions, now is the time for acquisitive companies to reap some "bargains", the analysts said.

"It will provide a good opportunity for any established company to pick up, at bargain basement prices, smaller companies short on funds," McCabe said.

Galloway agreed, saying: "This will shake out local companies, with some feeling the slide keenly. This means we will see some consolidation."

However, Hunter was quick to point out eisa's troubles, having recently announced its planned acquisition of OzEmail. "eisa may have trouble funding that acquisition now," he said.

Job crisis to continue

With acquisitions and folding companies on the cards, it may be tempting to think the demand for IT skills will drop off as the market absorbs the attrition. Not so, according to analysts.

"It will not even be a blip on the screen. The job market may be more fluid, making it easier to recruit talent, but it will also make it easier for talent to walk away," McCabe said.

And the resultant increased pool of job hunters "will not ease the problem significantly" McCabe added.

Galloway also said the correction is not likely to ease the task of fleshing out IT staff. "Companies will still be in desperate need for people with the right skills, and the job demand will absorb the job losses that will stem from this."

Galloway added skills likely to be coming on the market in the next few months will be Internet and dotcom abilities, "such as programming, marketing and business skills".

Face of dotcoms will change

The IT industry make-up will have fewer start-ups in general, with investors more wary of investing in "something they don't understand", McCabe said.

Analysts agreed the well-anticipated "Microsoft is a monopoly" announcement, was the catalyst for the market correction. However, the make-up of that investor market and its volatility were the perpetrators of the fall.

"Investors were not looking at business plans, making it online gambling," McCabe said.

And the companies suffering are those with IPOs planned in the next few months, analysts said.

"Expectations will have to be reset," McCabe said.

Galloway said this correction will also put pressure on start-up technology companies and dotcoms to start making profits, as "business is about making money".

She added the next generation of start-ups will spend less venture capital on marketing and brand building and more percentage of their budgets on "core business needs".

What head honchos had to say

"From our perspective, with about $100 million cash in the bank which is more than twice what we need to fund ourselves through to profitability, these gyrations of the market are academic."The market will take its course, and whatever financial professionals say will be wrong. "In the long term we are focused on strategy, as well as partnering with leading global companies." - Jeremy Phillips, deputy chairman, ecorp.

"There are some companies that we might have looked at before that were priced beyond what we felt was appropriate which may now be possible for us to acquire. But some companies and their fundamentals have been scrutinised more carefully. "If the market chooses to rate us down for a little while, so be it - we're in it for longer-term positions." - Gil Hoskins, chairman, Sausage Software.

What IT professionals had to say:

"It had to happen - there was hot air in the evaluation of stocks. But it's not the demise of dotcoms. . . it's the sorting out of the decent ones. - Anonymous, IT manager, software company.

"It's actually good for the global economy, as it will weed out the ones that are real companies as opposed to ‘fly by night' companies . . . for any bargain companies out there - the stronger companies may buy them out." - Patrick Teh, CIO, Hoyts.

"Dotcom stocks were grossly over-valued and the correction was inevitable. They simply didn't have the earnings or availability that justified the prices being asked - they couldn't sustain those values. However, this is not the demise of dotcoms." - Graeme Hurst, group manager of IT, Aurora Energy.

"There won't be a lay-off of staff - it will be a movement of staff. People will be jumping before they get laid off." - Glen Hickey, chief general manager corporate services, Adelaide Bank.

"Those clinging will have a hard time and there will be some consolidation and mergers. The explosion is only just beginning, it is in its infancy." - Anonymous IT services manger, industrial wholesaler company.

"Demise of dotcoms? No way - just a bit of a hiccup while they find their direction - some people who weren't as strong will latch on to other companies."- Anonymous IT director, university.

"I don't think it is a crash - it is a correction . . . the ones with real value will stay and the ones with no value or not much value will slide back. It will make it harder to raise capital in the near term. The good companies will go forward and the not so good will get swallowed." - Bill Hodgson, executive VP, Tequinox.

People have been so caught up in dotcoms emotionally, but they'll always be able to find a role. I can't see Australia meeting those demands in the next few years." - Andrew Fisher, corporate IT manager, Norths Ltd. - Lauren Thomsen-Moore

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