Editor's Note: With this column, we introduce Lord Hanson, a founder of the Hanson PLC companies. This column originally appeared on TheStreet.co.uk, where he will write on a regular basis. As always, let us know what you think.
No matter how stock markets perform, dot-coms are here to stay.
As a long-time proponent of change in business -- change or fade away -- I believe that the most exciting development in business today is the advent of corporate information technology. As long as you approach tech stocks like two porcupines would approach each other -- very carefully -- you'll be all right.
The demise of
in the U.K., among others, should not discourage you. You must learn from these failures. If dot-coms keep the concept simple and user friendly for home computers, which boo.com did not, then they should succeed.
boo.com was also guilty of indulging in a profligate spending frenzy which even the most naive businessperson would never have fallen prey to: Lavish offices, overstaffing, caviar, champagne and the Concorde for all does not add up to profitability or a sensible strategy for start-ups.
The key for the prospective investor, as famed U.S. investor
has said repeatedly, is first to decide on the quality and experience of management and, second, the business plan. Detailed analysis is available through a broker or direct from the Internet, so delve deep before you leap. And finally, ignore the hype.
As an Internet investor of several years, my previous experience in surfing potential acquisitions for
makes me cautious. Today's professional -- and many amateur -- investors are very smart, with money to invest but not lose, so they analyze their targets very carefully.
Early pandemonium to acquire a part of any and every dot-com IPO was overdone. Fund managers dared not miss "golden opportunities," so they piled in at the beginning, but many are now long gone, having taken their profit. Unwary private investors went mindlessly down the same path and were left stranded on the beach.
My concern is really alerted when I see TV advertising mentioning merely the name and no product. Name after name flashes on the screen, appealing to the subconscious mind, but with little to show what business they're in. The "management" of some dot-coms exhausted all their capital this way and were begging for more to do more advertising. Hard to believe they just don't get it, but not hard to believe that a number of those names are no longer around.
Back in February there was a supposedly dramatic change in the U.K.'s
stock index, or "Footsie," introducing a dozen technology stocks. I was asked to comment by the London
on what would happen to the "old" companies that had been dropped.
Not to be in the Footsie can have its disadvantages from a computer trading viewpoint, but my belief, expressed at the time, was that the dozen dropouts, which "made things" (including profits), would be around for a long time, Footsie presence or no. And it looks as if I was right, but now it's up to them to adjust their own business methods to progress in today's world of information technology.
So where does this leave us? What will the decline in technology share prices mean? Not very much to the pros, who will stay with the "blue skies" forecasts of those they think will make it -- a profit, that is.
The rest are history, another passing fancy.
Lord Hanson is the founder of the Hanson Group of companies, in which he is a shareholder. While Hanson cannot provide investment advice or recommendations, he invites you to comment on his column at