Technology Publications

On the Wrong Foot - Industry Trend or Event

Industry Standard, The, April 16, 2001 by David Lake

April 2 to 6, 2001

The second quarter stumbled out of the gate with more bad news from tech companies. On Tuesday, high-speed Net access providers Covad Communications and PSINet announced they would be late in filing their annual reports to the SEC - a sign that even they aren't sanguine about their financials. Another broadband provider, Rhythms NetConnections, may be delisted from the Nasdaq. And b-to-b big-shot Ariba announced radically reduced earnings expectations.

So far the number of people going online has remained relatively unchanged. According to Media Metrix, Net traffic levels fell ever so slightly to 63.8 million surfers last week. Those consumers who remained didn't increase their shopping, either. Total e-commerce orders fell for the fourth consecutive week, dipping 4 percent to 5.5 million orders.

The Economic Cycle Research Institute predicted the U.S. economy will enter a recession before the end of the year. It blamed the tech industry - which now accounts for more than two-fifths of GDP growth - for dragging down the overall economy.

Net-related layoffs gained momentum, as 23 firms issued pink slips to approximately 7,800 employees. Among those hit hardest were Web consultancy MarchFirst, which slashed 1,700 positions. Winstar Communications shed approximately 2,000 jobs. On Monday, the Information Technology Association of America said U.S. companies will create fewer than 1 million new IT jobs this year, a 44 percent drop in new job creation from 2000.

The Internet Economy Index rates the week of April 2 a 2.

STOCKS 8%

ADVERTISING 1%

[Graph omitted]

SHOPPING 4%

TRAFFIC 0%

LAYOFFS 147%

PERFORMANCE 14%

STOCKS: DOWN 8%

Dell's Bells. On Thursday, Dell Computer announced it expects its first-quarter revenue and earnings to be in line with lowered guidance and analysts' estimates. That news helped send the tech-heavy Nasdaq upward. The Industry Standard 100 index, which has lost half its value this year, ended the week down 8 percent at 321.

CLOSING PRICE AS OF APRIL 5. INDEX TRACKS THE PERFORMANCE OF 100 INTERNET-RELATED COMPANIES. SOURCE: BLOOMBERG

ADVERTISING: DOWN 1%

Ad Dollars Down. Six industries, including financial services, entertainment and telecom, cut their online ad spending for the week. Web media and retail industries -- typically the largest advertisers -- kept their spending steady, while hardware and electronics companies increased their ad spending slightly. Overall weekly spending dipped 1 percent.

COMPOSITE INDEX OF THE AMOUNT SPENT ON INTERNET BANNER ADS PER COMPANY THAT ADVERTISED ONLINE FOR THE WEEK ENDING APRIL 1. SOURCE: ADRELEVANCE

[Graph omitted]