BALTIMORE -- Ed Yardeni, Deutsche Banc Alex. Brown's chief investment strategist, said he's glad he didn't take Yardeni.com public last year. The big house he'd have bought in the wake of the imaginary IPO would be tougher to pay for these days, he cracked, and he'd have to erect security gates to keep angry shareholders out.
If only the 250 companies presenting at Deutsche Banc's tech conference here this week were so lucky.
Despite the requisite Casino Night, investors here haven't seemed in the mood to gamble with anything more than the $50,000 in play money they got at the door of Tuesday night's theme party. It's not that they're pessimistic, but that the combination of lower expectations across the tech sector and the specter of the
Securities and Exchange Commission's
Regulation Fair Disclosure, known not so affectionately as Reg FD, has kept a lid on promises of, well, promise by the presenting companies.
"Investors want to hear about profitability and market opportunity," said Andrea Williams-Rice, an Internet analyst at Deutsche Banc.
Companies such as
took to the podium to defend their companies, despite huge slides in their market capitalizations since the spring. None, except Tibco, down to $65.75 from a 52-week high of $147, promised world domination. Razorfish once traded at $56; now it's at about $5.
Even Yardeni said he hopes investors will be more restrained when approaching tech stocks in order to avoid a repeat of the speculative bubble of 1999.
Still, he contended that tech is in just the first phase of the revolution. "I don't think the PC era is dead," he says, adding that tech sectors will morph together to boost productivity. The emphasis may be on e-commerce, which he calls a potential "killer application."
Yardeni said that a recent survey of information technology managers showed they foresaw their budgets increasing 19% during the next year, with an average of 27% of those budgets spent on e-commerce, primarily business-to-business.
Will that be enough, though, to convince investors who have taken major hits on almost all things tech in the past six months? They're wary, and with good reason. The initial public offerings they chased so voraciously last year have turned sour, and the subsequent ill will has trickled down to venture stage companies.
One CEO of a wireless application provider lamented the fact that the company had yet to land a lead underwriter, although it had no shortage of co-underwriters. "It's really, really tough," the CEO said.
One investment banker here sympathized. "The C round is no longer an IPO," the banker said, referring to the third round of fund-raising private companies undertake. A colleague chimed in, though, that last year's IPO darlings can't be faulted for quickly going to the public markets: "When you have the opportunity to raise capital, you do it."
Now, though, the companies Williams-Rice, the analyst, watches the closest are frequently "offline-online combinations" such as the pending
"Companies have to face reality and look for meaningful business," she said. "The combination, of AOL and Time Warner for instance, allows them to touch people in so many more ways." (Her firm hasn't done underwriting for AOL or Time Warner.)
Meanwhile, there will still be those who go after promises. "There are people chasing a lot of rainbows looking for a pot of gold," warned Tibco CEO Vivek Ranadive. "The question is which rainbow is going to lead to that pot of gold."