Consolidation has Web firms debating menu choices
October 8, 1998 08:50 AM
By Eric Auchard
NEW YORK, Oct 8 (Reuters) - Internet World is underway here this week, and amidst the clamor of product announcements and swapping of e-mail addresses that typify such conferences, the main topic of conversation is -- who's next for lunch?
Overshadowing the feeding frenzy of 50,000 expected attendees poring over 650 company exhibitions are everywhere the signs of accelerating industry consolidation.
Discussion at the season's central gathering for the online trade have centered on news of the latest moves to eat, or be eaten -- CDnow Inc. CDNW in talks to merge with N2K Inc. NTKI and Bertelsmann AG's purchase of a 50 percent stake in Barnes and Noble Inc.'s BKS BarnesandNoble.com.
Industry insiders at the conference said both alliances aim to feast on at least part of the business of Amazon.com Inc. AMZN , the online bookseller and very recently a purveyor of music, and the Internet's most successful business to date.
This fall's Internet World seeks to prove that the industry has matured and that it has a new appetite for business-to-business commerce, rather than just for playing follow-the-leader behind consumer business kings Yahoo! Inc. YHOO and Amazon.
"These deals recognize the fact that there's not an unlimited capacity for consumer electronic commerce," Gary Arlen said as he wandered the show floor. Arlen, a 20-year veteran observer of the online industry, heads Arlen Communications in Bethesda, Md.
"Besides, what's the value of (any) Internet company with scant revenues?" he asked rhetorically.
Investors took heed of signs that even top consumer brands on the Internet are no longer immune from competition, driving Amazon.com stock down nearly $15 to $93 while Yahoo! Inc. fell $10.44 to $114.37 in Nasdaq trading Wednesday.
Dominating the trade show floor at Internet World are the usual mix of big name computer companies like Microsoft Corp. MSFT , International Business Machines Corp. IBM and Sun Microsystems Inc. SUNW , alongside a proliferation of hundreds of smaller start-ups.
Also highly visible are another, newer set of huge players -- the telecommunications giants -- AT&T Corp. T , MCI WorldCom Inc. WCOM and Level 3 Communications Inc. LVLT , Lucent Technologies Inc. LU , Northern Telecom Ltd CA:NTL NT , Oy Nokia Ab and Motorola Inc. MOT .
Other well-known Internet names already have become other people's meals -- Infoseek Corp. SEEK , now allied with Walt Disney Co. DIS ;, EarthLink Network Inc. ELNK , now backed by Sprint Corp. FON ; NetObjects, a part of IBM; and Wired Digital Inc., which agreed to be acquired Tuesday by Lycos Inc. LCOS .
In keeping with the big is better theme, Internet World keynote speaker Larry Ellison, the outspoken chairman and CEO of database software leader Oracle Corp. ORCL , toldconference goers to learn to love the mainframe again, arguing that it is the only type of computer capable of running Web businesses on a global scale.
He noted that Yahoo, Amazon.com and all other high volume consumer Web sites rely on centralized computer systems running Oracle databases.
Ellison argued that the Internet lends itself to being run on centrally managed computers run by professionals instead of requiring personal computers loaded with applications, requiring constant maintenance and subject to frequent breakdowns.
He said this applies not just to the multinationals who have run their businesses on huge mainframe computers for years, but also to small businesses, which, Ellison said, are discovering how economical the Internet makes it to contract out their computing tasks instead of managing massive computers internally.
It was a message that might have had him booed off the stage in earlier years of the entrepreneurial-led Internet revolution.
Ellison said his company plans to offer a new outsourced business service known as Oracle Online, a plan that strongly resembles the old mainframe computer time-sharing businesses of the 1970s.
Oracle plans to partner with thousands of independent software providers to create software running on top of Oracle databases. These partners would in turn sell these software-based services to small businesses, relieving them of the need to manage their own computer systems.
Doctors could forego installing accounting software or patient-billing systems in their offices and contract instead with outside providers that consolidate such services and supply them to thousands of doctors online, Ellison cited as an example.
Oracle Online would operate as a separate company, majority owned by Ellison's company. Oracle plans to offer its own first product via Oracle Online early next year -- an Internet-based sales forecasting software that allows companies to track sales orders in real time, he said.
"The cool thing about the Internet is that it centralizes complexity brilliantly and it distributes information access," he said, relieving customers of the need to know anything more about technology than how to use a Web browser. "The economics of the Internet are overwhelming," he said.
Other trade show participants were more somber.
"Most of these companies won't exist two years from now," said the chief executive of one Internet advertising start-up who visited the trade show on Wednesday.
His own company has attracted nearly a million individual sign-ups for his service, he claims, but, like so many of its peers, has yet to generate meaningful revenues.
Still, judged by appearances, he faces the threat of extinction calmly, confident that another start-up opportunity lies waiting for him just over the next technology horizon.
((-- Eric Auchard, New York newsdesk, 212-859-1840)) REUTERS
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