By Julian Goldsmith, 19 May 2000 00:25
COMMENT A dark cloud has settled over the dot-com community following online sportswear retailer boo.com calling in the receivers. Suddenly some financial analysts are saying their love affair with tech stocks is over, and investors are running back into the arms of safe stocks like utilities. The analysts and investors doing this are short-sighted. First, consider boo.com's particular situation - a sportswear site which didn't sell any of the big name brands and which was optimised for data transfer rates most of its customers could only dream of. It spent £25m on an advertising campaign at odds with the image of the site, and it featured an annoying digital assistant. If boo.com had been made of bricks and mortar, it would have failed just as quickly. Investors should be learning the Internet isn't a magic wand and only enterprises with strong business models will survive. Watch out for more dot-coms nose-diving. It's a sign that the sector is growing up. As for the börses ending their love affair with technology stocks, as Merrill Lynch predicted - the downturn comes in the same week Lycos was snapped up for $12.5bn and a not-so-old-fashioned Marconi won a £63m contract from Coca Cola for smart vending machines. There are other hard luck stories coming from the sector - what else should the money men expect from a vibrant, fast-moving marketplace? Dresdner Bank yesterday also announced it is cutting 5,000 jobs, but so far nobody has said investors should bail out of banking. In the final analysis, investing in technology companies is, by and large, sound. Some businesses in this sector do have bad models - and they will fail. People who don't research their investments and pour money into these businesses shouldn't be in the market.
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