Information Technology Reference
In-Depth Information
By about 2005, maintenance and enhancement of legacy applications would
pull ahead of new development as the main activity of software engineers.
The Dot-Com Bubble
In the 1990s, the expansion of the internet and the World Wide Web created what
was called “the new economy” when companies used the vast reach of the web
to try and sell products and services to millions of people rather than selling loc-
ally in brick-and-mortar stores. Some of these dot-coms were Amazon, eBay, and
Priceline, all of which had interesting and effective business plans.
However, the excitement of the web led to many startups whose business plans
were not well thought out. There are many products that are suitable for remote
web marketing, but others are best served by local stores.
The venture capital community is not really very sophisticated in risk and mar-
ket planning, and it invested unwisely in companies that proper due diligence
would have led them to avoid. The inevitable result of the rush to the web was
an artificial bubble of dot-com startups, many with inflated market values. This
bubble started to expand during the 1990s, but it could not continue forever.
Speculative bubbles are common economic phenomena and have occurred
many times over hundreds of years. Indeed, a second speculative bubble, housing,
would crash later in 2008.
The dot-com bubble reached its peak on March 10, 2000, when the NASDAQ
technology stocks peaked at 5,132.52. This was about double the stock value from
a year before. Many of the technology companies whose stock prices were soaring
were losing money, and a few had no revenues at all. The speculative bubble was
about to burst.
The Super Bowl in January 2000 featured 17 advertisements by dot-coms, each
of which had paid at least $2 million. This was a unique phenomenon to have so
many young companies with enough cash on hand to commission Super Bowl ads.
On April 4, 2000, a decision in the Microsoft antitrust litigation was an-
nounced, and Microsoft was found to be a monopoly. NASDAQ dropped to a low
of 3,649 but rebounded to over 4,000 at the end of the trading day.
Barron's Magazine
had run an alarming article that stated that of the 371 dot-
coms trading on NASDAQ, many had never made a profit and would probably
fail when they burned through their venture funds. From that point on, the bubble
shrank rapidly through 2000 and 2001 and into 2002. Dozens of dot-coms disap-
peared, and many others saw their stocks drop precipitously.
Search WWH ::
Custom Search