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TrendReport 2001

Stock Market Downturn

  • Acknowledgement of a bear market
  • 1,600+ mentions of "bear market" in major media during Q1
  • Not just NASDAQ; DJIA and S&P both hit low points
  • Many say bottom has not dropped out – yet
  • Major question: "Is the worst over?"
  • Sudden investor appreciation for "bottom line"
  • IPO issuance slows to a crawl – consolidation instead
    • 2001: 78 deals withdrawn, only $7.8 billion raised YTD
    • 2000: 406 deals, raising $97 billion
  • VC $$ dried up – smaller deals now of more interest
  • Mutual funds records set: more closed or merged in 2000
  • CNBC's ratings, favorability decline
  • Scaling back at brokerages
    • Ad campaigns for Schwab, others, toning down message

CEOs Under Scrutiny

  • Companies struggling to find good leadership
  • Revolving door in CEO office
    • Boards, investors losing patience ("Blood in the Boardroom")
    • Former execs returning (Lucent, Maytag, Xerox, Campbell's)
  • Greater Accountability
    • Lucent lesson
    • John Chambers' words come back to haunt him
  • Question of whether execs can keep pace
  • Wall Street Journal: CEO Turnover Slows as Boards Seem Tolerant in a Cool Economy
    • But not for CEOs of start-ups
  • Eyes on executive compensation: New York Times, Wall Street Journal, Business Week, Forbes, Fortune
    • Opportunity for Leadership/Vision


  • At least one major layoff announcement per week
    • Forbes 500 Body Count: 332,345 (as of April 20)
    • Industry Standard's Layoff Tracker: 77,220 (as of March 30)
    • Job reductions tripled level from 2000
  • Hitting all sectors, including media
    • Editorial staff at New Economy pubs, Networks (ABC, CNN, NBC), websites (, and newspapers (San Jose Mercury News)
    • Numerous stories about what laid-off tech workers are doing with their time
    • Impact on San Francisco and Seattle
  • Pink-slip parties & the new workforce mentality
    • Employer: Focus on performance-based employees
    • Employee: B2B (back-to-bricks), B2C (back-to-consulting)
  • Recruiting story changes 180 degrees

Earnings Announcements

  • Meeting expectations doesn't do much to protect stock price
  • Announcement by one company within sector moves everyone else – i.e. Palm's announcement and affect on Handspring & Dell's announcement on rest of market
  • First six months of Reg FD:
    • Companies increasingly issued guidance
    • Companies now increasingly reluctant to provide guidance
  • 700 pre-announcements in Q1, according to CNBC; 81% were for lower expectations, according to Business Week
    • Some issued guidance twice in Q1 (Cisco)
    • Communications sector projections: -88%
  • Greater skepticism in accepting guidance
    • Business Week says: key word is "visibility" (or lack thereof)

The Fed & the Bush Administration

  • Greenspan no longer omniscient
    • Business Week cover story: "Feeling the Heat" with photo of Fed chairman
    •'s James Cramer defends "Infallible Al"
  • Rate cuts aren't calming Wall Street - yet
    • Even surprise cut lacks long-term impact
    • The Street has already factored in additional cuts
  • Impact of Bush administration on economy
    • Tax plans, trade initiatives, China

No More "New Economy"

  • Comeback of "brick-and-mortar"
  • Trickle-down effect of "recession"
    • Goods and services, employee benefits (like in-house dry-cleaning) may be cut back
    • Vendors feel impact of business going south, long sales cycle
    • The decline of the "iants"
    • Down-rounds
  • Reporters mock and chastise anyone who left good jobs for a dot-com, anyone who counted on options for retirement
  • Financial/industry analysts as punching bag: blamed for hyping stocks and buying into "New Economy" concept
  • At least 220 Net companies died in 2000 (bye-bye

Energy Crisis

  • Impact on California's economy, psyche
  • Potential for crisis to spread across the country
  • Impact on other industries
  • cost of "rolling blackouts" to manufacturing, business (Disney Land)
  • increase oil prices
  • Impact of Dept of Energy policies
  • Arctic National Wildlife Refuge
  • Anti-regulatory mindset

Pure Tech Trends

  • More questions about wireless standards: is 3G necessary? (Europe fine with 2.5G)
  • Also: will SMS (short messaging service) hit the U.S.?
  • m-Commerce, especially in Europe
  • Concerns about BlueTooth
  • Napster loses in court; ramifications for P2P
  • Online fraud, privacy and identity theft issues still in the news – especially for users of broadband (DSL/cable modem)
  • Intellectual property arguments, copyright reform
  • Healthcare on the Internet; digital records & privacy
  • Dot-coms selling assets, including user lists (privacy concerns)
  • Broadband glut vs. future needs

Bright Spots

  • Neutral-to-positive Business Week cover stories on HP, AOL-Time Warner, Enron, Pearson, Gemstar (all revolving around dynamic CEO)
  • Consumer confidence falling, but not as fast as some predicted
  • Unemployment level still low: 4.5%
  • Productivity levels drop, but still surpass all other economies
  • Market: still volatile, but above 52-week lows
  • MS XP may spur hardware purchases
  • Shrinking inventories – chips, routers, etc.
  • CIO Survey: Increase IT spending by 6.3% (up from 3.8 in May)

Media Overview

  • Media still:
    • very interested in leadership
    • looking for a good story amid doom & gloom
    • very competitive
    • redefining websites, missions, staff
  • Newspapers, Online sites:
    • cover significant news that impacts stock
  • Magazines:
    • different news cycles = broader biz issues

Media Predictions

  • More consolidation as some end up as roadkill
    • Brill's Content +
    • Implication: changing landscape impacts strategy, focus
  • Day of the 300+-page issue over
    • Business 2.0, Fast Company, Industry Standard, etc. no longer topple mailboxes
    • Ad buyers fleeing, saving pennies
  • Some editions going away altogether
    • Forbes ASAP folded into Forbes: Best of the Web
    • Industry Standard European edition and Grok special editions gone
  • Tech coverage in national dailies down sharply; number of pure tech stories down about 30-40%; focus of tech coverage is on earnings, pre-announces, etc.
  • Not just numbers: New Economy pubs getting slammed by other media for hyping tech last year
  • E-media feeling pinch, too – 27 went public last year, collectively stock down 80% from 52-week highs
  • Fewer outlets increases competition
    • Implication: who gets "exclusives" will be key issue
    • Implication: fewer reporters to target (website and print staffs may merge) – may foster closer relationships
  • Looking for TNBT: The Next Big Thing
    • Who weathered the storm; right leadership, business model
    • What does the Internet of the future look like? How can it be used effectively?


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