Down for the countdown

When disaster strikes, the world starts counting.

The scandal over WorldCom’s alleged accounting irregularities was barely a day old before more troubled firms came out of the woodwork. Xerox said it would be restating revenue by about US$2 billion. On Monday morning, the Wall Street Journal

reported allegations that Merk & Co. failed to report more than US$12 billion in revenues. Everywhere I go, people are speculating on how long the list will be once the domino effect unleashed by Enron makes its way through the business community. I’m sure people are keeping tallies, if not actually starting pools. Maybe Dot-Com Dead Pool is finally drying up.

I’m referring, of course, to the ongoing record kept by the Web site which for the sake of younger readers I will refer to as F–company.com. This content zone, which has grown to the point where you actually need a user name and password to access it, not only reports the dead but the dying, usually by leaking internal e-mail or company memos from the soon-to-be-departed. It is hardly alone, however.

Webmergers.com takes a more scholarly approach by breaking year-over-year totals into percentages and trying to extrapolate longer-term trends. Its most recent findings, issued late last week, says there has been a 73 per cent drop in the number of bankruptcies and shutdowns in the first half of this year compared to the same period in 2001. That means that, in contrast to the nearly 44 shutdowns a month we saw last year, we’re seeing less than 20 now.

Like the accounting scandals, the demise of dot-com companies became a parlor game almost anyone could play. At industry conferences or events, dot-com concepts would be described, then someone would say, “”I wonder how long THAT one’s going to last!””

In Canada, a variation on the theme emerged as the competitive local exchange carrier (CLEC) market entered a downward spiral, taking Cannect, Axxent and many others along with it. I actually suggested Communications & Networking launch a monthly “”CLEC Death Watch”” which would use an image of a tombstone with the name of the latest casualty. For a number of reasons, this never happened, and I’m glad.

The IT industry loves these numbers games, even when it offers us little value. That the dot-com market is smaller is self-evident; there will no doubt be fewer shutdowns as a result. But Webmergers.com can’t leave well enough alone, insisting on a tacked-on commentary at the end of its report which tries to inject some optimism into its results. “”In April, we began to see an increase in signs that cyberphobia is waning as investors start to realize that certain kinds of online business models make sense,”” it says, defining cyberphobia as the irrational fear of Internet-related investments. “”Hints of financial health in sectors like online travel, entertainment and e-recruiting and a surprise profit from Amazon.com helped revive faith in at least these sectors.”” It goes on to point out a few recent startups and some positive media coverage of the industry, admitting this is anecdotal evidence at best.

There is safety in the kind of cynicism behind these tabulations of failure, and our individual responses say a lot about our abilities to cope with upheaval. On the one side is the snarky gossip of F–dcompany.com. On the other is the desperate hope of Webmergers.com. Far better is a project begun by the University of Maryland’s Robert H. Smith School of Business, which is compiling a Web site archive of dot-com business plans where future generations could learn from the mistakes of the past. Similarly, the importance of the accounting irregularities lies not in placing bets about the next offender but an overhaul of reporting practices that restores credibility among shareholders and customers. We need more of these efforts. If we’re going to spend so much time keeping score, the least we could do is try to improve the game.

sschick@itbusiness.ca

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