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To: fedhead who wrote (17154)	7/17/1998 5:30:00 PM
From: Johnny Canuck	Respond to of 69822

Candian Financial Post: Silicon Valley facing venture capital downturn By SIMON AVERY California Bureau The Financial Post Despite emerging fears that the high-tech industry will face a downturn this year, venture capital investors pumped a record US$460 million into young, Internet-related companies in the first quarter. That figure represents a 54% jump from the US$298 million invested in the first quarter of 1997, a study by Price Waterhouse Coopers says. Kirk Walden, national director of the venture capital survey, said yesterday venture capital firms are well on their way to breaking 1997 total Internet investment of US$1.9 billion. The surge in Internet-related investment by professional money managers comes at a time when some of the biggest players to have benefited from the Internet in the past are now laying off thousands of employees. Intel Corp. is cutting 3,000 jobs, or 5% of its workforce, Silicon Graphics Inc. is laying off 1,000, or 10% of its staff, and disk maker Seagate Technology Inc. is trimming 10,000 from its 100,000 workforce. In addition, many established Internet companies are being downgraded by some analysts because their fundamentals don't justify the record-high stock prices. Analyst Paul Noglows of Hambrecht & Quist downgraded Yahoo Inc. from "buy" to "hold" and Steve Horan of NationsBank Montgomery Securities similarly reduced Amazon.com. Yahoo has a market capitalization of about US$9 billion and recently announced second-quarter earnings of US15› a share. "The business model for success in Internet companies is not well understood," said Walden in explaining the apparent discrepancy between the findings of his survey and market trends. "It's absolutely true that investments made by venture capitalists two years ago have yet to pay off. But the potential is still there." The startup companies ranged from Web servers to telecom and software enterprises. Unlike in previous years, their focus was on enabling businesses instead of consumers to use the World Wide Web. Venture capitalists have decided the consumer market has been played for all it can be and the business market is where the future money lies. "Don't expect to see any more Yahoos being funded," Walden said.