Net's four horsemen remain in the saddle
By ERIC WILSON
Tuesday, February 20, 2001
Senior executives of the Internet's four horsemen Cisco, Oracle, Sun and EMC remain defiantly bullish about the future despite boom-time investors receiving a fiscal flogging from the Net's favorite stocks.
On average these now trade about 53 per cent lower than their September highs, but company officials are adamant the fundamentals underlying their "new economy" investments are sound.
Not long ago, if your bright new dot-com was powered by the four horsemen, you got a tick in the venture capitalist's technology box; if not, you risked being put aside as a risky "science project". The known combination of Cisco's market-leading Internet protocol technology, Oracle's databases, Sun's servers and EMC's storage networks greatly reduced the risk of IT failure or so they said. Because of this the four horsemen seemed invincible, together pushing giants such as Microsoft around with apparent ease.
But if the dot com crash was not enough, an application service provider (ASP) meltdown is now in progress, while a chilly wind blows over Internet companies built on banner ad sales.
"I strongly believe history will show this is a small wrinkle in a long-term trend," says Terry Walsh, Cisco's Australian managing director. "Every telephone in the world will be an IP (Internet protocol) phone. The Internet is a revolution. None of the trends are going to stop just because the stockmarket is overheating."
Walsh identifies these unstoppable trends as eLearning, voice/video/data convergence, IP telephony and content delivery networking. EMC sees it another way. Even in an economic downturn, applications still churn out reams of information, which somehow must be stored and retrieved.
"The Internet is continuing to grow rapidly," says Ken Steinhardt, EMC's global director of competitive marketing. "Traditional business models are extending through the Internet so you have bricks-and-mortar entities opening up the new Internet channel. So we see the potential for a huge explosion accelerating beyond what we see today."
"The Internet is continuing to grow rapidly. Traditional business models are extending through the Internet so you have bricks and mortar entities opening up the new Internet channel."
Jim Hassell, Sun's Australian managing director, agrees: "It's important to separate out the high-profile problems from what is happening across the board on the Internet. That doesn't take away from the fact it's a fundamental change."
Much humbled by their mauling in the markets, the most vocal of the four horsemen Sun and Oracle seem to have toned down their "they don't get the Net" lampooning of Microsoft. After all, since September, their enemy's stock price has performed up to four times better plunging a mere 15 per cent in shareholder value. Apparently Microsoft is not perceived to be so dependent on the Net's fickle fortunes as are the four horsemen, despite a big campaign to reposition it this way.
To the uninitiated, the IT industry's crazy "tech wreck" is a sure sign something is fundamentally wrong. This business is nothing if not optimistic, however. The four horsemen seem to have remarkably robust businesses. Brian Mitchell, Oracle's Australian managing director, paints a typical picture: "I would characterise dot-com organisations in three ways. There are start-ups who haven't scaled, who are therefore not buying large volumes of solutions such as Oracle. They were important for potential future business, which now doesn't exist. The second class of dot coms are profitable or nearly profitable, such as Wineplanet, which have built their business around Oracle products. The third class is not really a dot-com, but like Foster's, have an e-business component. So overall, there hasn't been much impact for Oracle."
Hassell says much the same thing about his revenue streams, shrugging off the collapsing dot-coms as a minor percentage of sales. So will Sun stick with its "the dot in .com" branding campaign?
"Yes, we're sticking with that," he says. "You have to think of this as what it is doing with business (in general). It's a fundamental change. The `dot in .com' is driving the infrastructure platform hardware and software, not just the start-ups."
Oracle has conceded to the US Securities and Exchange Commission, however, that those drivers may be slowing down with the weakening US economy, causing decreased hardware and software sales. Steinhardt singles out the hardware business as the one place where the IT industry could go soft quite quickly.
"We will see two to three times higher growth [rates in the storage market] moving from character-based information to rich media," he says.
"But processing vendors have done themselves in. When was the last time I really needed more megahertz compared with how am I going to get some extra storage to squeeze the information in?" But for now, given deteriorating market conditions and a so far dismal dot-com and ASP track record, will the four horsemen of the Internet ride tech stock heights again? Walsh remains optimistic about the future: "I think what has happened is dot coms have gone to the market with grand business plans. But it's often the second wave that gets it right. It will be very sustaining (in the end)."
ecw@compuserve.com.
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