One would hardly expect Michael Bloomberg, chief executive officer and founder of Bloomberg LP, New York, to downplay the importance of the Internet technology and Internet stocks.
But that's exactly what he did in a speech given to the Commonfund Forum last month in Orlando, Fla.
"The Internet is just another way of using a phone line," he said. The new technology has "great tools," he said, but basically exists to help people do what they already were doing, only a bit more easily.
Mr. Bloomberg said that from 75% to 80% of the dot-com stocks are trading below their initial offering prices.
"Most of these companies are not making money. A lot of people want to work for the dot-com companies, but the likelihood of hitting the jackpot is low," he said, adding the market for Internet stocks has become like the art market, with various stocks, like artists, coming in and out of favor.
There are two patterns of Internet stock trading, according to Mr. Bloomberg: "Either they (the stocks) come out at one price and slowly drift down, or they come out, go up and then go down." Firms such as Microsoft Corp., Intel Corp. and Cisco Systems Inc. will do well because "they give other firms the means to do business," he explained.
But he thinks the so-called "new paradigm" dot-com stocks won't make money. "They think technology costs will go down, but they don't, and say revenue will go up as word (about the companies) gets out, but often they don't."
He predicts the winners will be the old "brick-and-mortar" companies that use the Internet to enhance their businesses.
"It's hard to compete with Wal-Mart," he said.