The Party Is Ending for Many Dot-Coms

AltaVista Chief Executive Rod Schrock steps into his office in the hills of Palo Alto, his face bearing the strain of efforts to insulate the venerable search engine company from the turmoil rocking the Internet industry.

After rapidly expanding the staff last year and pouring millions of dollars into an advertising campaign deemed by many to be a failure, Schrock in the past few months has fired 50 of its 800 workers worldwide, reassigned 60 others and been forced to admit defeat in an effort to defrock Yahoo! of its title as world’s leading search engine.

But he blames the troubled times on a lesson being learned by nearly everyone in the Internet industry.

“Frankly, my view is the Internet industry, the craze around the Internet, ultimately caused unhealthy behavior,” Schrock said, his eyes red-rimmed from a long week of strategy reviews. “That behavior was: ‘Focus on acquiring an audience at all costs, regardless of costs.’ ”

Now the Internet party has become the pink-slip parade.

Many companies are paying the price as high-flying stock prices crash down to earth and funding dries up.

The list of troubled businesses is long: Value America, DrKoop.com, KBKids.com, Quepasa.com, Petplace.com, Petstore.com, CarOrder.com, Salon.com, TurboLinux. Even online retailer Amazon.com--viewed as one of the most stable Web companies--has shed some of the fat built up when oblivious investors lavished millions upon it.

“The first phase of the Internet, characterized by little more than exuberance and an uncertainty about what the industry was going to look like, is coming to an end,” said John Challenger, chief executive of Chicago-based job-placement firm Challenger, Gray & Christmas. “Now we’re moving into the second phase of the digital revolution . . . where we’re going to sort out the companies that don’t produce. There’s no doubt you’re going to see a summer littered with dot-com layoffs.”

The firm, which tracks hiring and firing across all industries, found in a recent study that the high-tech industry is outdistancing the pack in replacing its chief executives, a reflection of the increasing desperation in the struggle to survive, Challenger said.

Analysts who follow the e-commerce industry are closely watching the online shakeout.

PlanetRx.com, Autoweb.com, Buy.com Inc. CDNow Inc., Drugstore.com Inc., Egghead.com Inc., Fogdog.com Inc., Garden.com Inc., HomeGrocer.com Inc. and Streamline.com Inc. are among those that will run out of money in the next 12 months unless they get additional funding, Goldman, Sachs & Co. analyst Anthony Noto said in a report last month.

Forrester Research went even further in the gloom-and-doom predictions category, saying the majority of dot-coms will go out of business by 2001. Among the first were London-based retailer Boo.com, APBNews.com, which focused on crime and the justice system, and, just in the past week, Hollywood Entertainment’s Reel.com subsidiary.

At AltaVista, Schrock chafes at being lumped in with those companies. He says chief stakeholder CMGI remains committed to seeing AltaVista through its extended makeover, despite stock turmoil that forced AltaVista to postpone indefinitely its planned initial public offering.

The company now is positioning itself as a “Web-wide knowledge resource” that allows people around the world to search for comprehensive information on a topic before going to a partner site to buy or get specific information. It also is licensing its search technology to other e-commerce sites, an arrangement that accounts for nearly 15% of its annual revenue.

“There are going to be several Internet companies that are going to have to consolidate or dramatically reshape their expectations,” Schrock says. “Venture capitalists have closed the golden doors right now, but we’re backed by a company that has $500 million in cash. They’re fully prepared to help us develop in the long-term.”

But what are the long-term prospects for displaced workers?

Challenger and other job-placement firms say the high-tech industry still is scrambling for qualified workers in a tight labor market. Some company executives report they comb the Internet and papers looking for dot-com failures in hopes of being the first to snap up displaced employees.

The layoffs, for many then, might represent only a delayed purchase of a new Jaguar or million-dollar home.

“It was more of an inconvenience than anything else,” said Francine Schwartz of being fired from Healthshop.com, a San Francisco company that sold natural-health products before shutting down in April.

“It was very easy to find a job--I didn’t really have to look, to tell you the truth,” said Schwartz, 51, of Novato, who a took position three weeks later at San Rafael-based ICPlanet.com, a site that connects recruiters and consultants. “I found myself talking to people on the phone where I truly felt I was interviewing them more than they were interviewing me. Now I have a better job, paying more money that’s closer to home.”

Other fired workers are taking a new look at traditional brick-and-mortar companies that now are expanding their online presence, looking to the security of firms that have existed more than five years.

“The skills these people have developed [at dot-coms] are in great demand, and they still can write their ticket if they’re willing to be flexible,” Challenger said.

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On the Net: https://www.altavista.com