Previous : Was It Really A .COM Crash?
So from those simplistic examples it appears to be true: There has been a collapse of the .COM world! The Internet just isn't living up to its hype and obviously needs to be abandoned. Billions of dollars have disappeared and we're all poorer, and the economy is henceforth screwed, right? As a "contrast" let's take a look at good old fashioned computer software/hardware companies: They've been the real winners over the past years with many such companies building superb revenue bases and excellent profits, and are largely used as the get-rich-somewhat-quick examples (i.e. "If I bought MSFT 7 years ago..."). Presumably, if indeed the crash is purely the .COM world, these computer solutions equities should be more stable.
~96.2% drop from January 3rd, 2000 to February 20th, 2001
~94.2% drop from January 3rd, 2000 to February 20th, 2001
As you can see from these two example Linux shares (Redhat and VA Linux), the same trend that was seen in several Internet stocks is evident here: Around Christmas 1999 to early January 2000 these stocks were peaking and then the collapse came - Approximately a 90% reduction in just over a year. To put this "correction", as it is always called in hindsight, into perspective, RedHat, a developer, distributor and service provider for the open source, freely available Linux operating system, was hypothetically worth approximately the same amount as the Ford Motor Corporation for a short period of time: RedHat achieved a market valuation on par with a multinational, huge infrastructure automobile company selling $20,000 autos to millions of people with a worldwide distribution network, market loyalty, and customer lock in. Contrast that with RedHat which distributes a Linux distribution which could be freely downloaded, brand loyalty that in my opinion is marginal at best, and that tends towards a customer base that became more disenfranchised the more marketshare RedHat gains (sort of the anti-success factor). Of course the economic model often stated as the underpinnings of Redhat is that they have support plans and corporations would line up to get support for their Linux systems, but remember that Linux is a field that is applauded for its excellent newsgroups, mailing lists, and user groups: In other words the "movement" has support built in. To bring up a commercial example, it's like making a business model around providing repairs for all of those Maytag owners out there (note that I'm not endorsing Maytag, but as most of you are probably aware of the Maytag repairman commercials it is an apt analogy. For all I know though Maytag's products might be less reliable than @Home's email system). This isn't new information that came out of nowhere: This is information that most everyone knew and believed but wasn't willing to state publicly because they either had a vested interest, or they feared offending someone who did.
One interesting thing to keep in mind when looking at the collapse of stocks is this: While it seems like they didn't so much collapse as simply declined over time (in this case 15 months), if it weren't for the masses of greedy, contrarian investors thinking "Okay, it's bottomed out! I'm buying this value stock!" without any true valuation apart from simply thinking "Well it used to be $X and now it's $1/2X, therefore I will buy presuming that it will regain to $X!", the drop would likely have been much more precipitous for many of the stocks that have suffered in the past 15 months. For every share sold there is a buyer, and that buyer is buying on the hopes that it has bottomed out and soon they'll be in the money.
A case could be made that Linux share prices are inherently tied to the health of the "Internet Economy", as of course the servers that power the Internet are using software made, supported, or distributed by companies such as Microsoft, Redhat, and VA Linux, however such a connection would be minimal at best: The honeypots for companies such as these are large corporation that use the systems for internal infrastructures, and these corporations have little relation to the E-conomy. A proof in point is Oracle, a high end database and application vendor, while down in recent times, has generally had normal stock fluctuations.
Next: Okay, so it was a Tech Crash?