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Wednesday, 11 October, 2000, 15:48 GMT 16:48 UK
Dot.coms 'are fading'
Dot.com company presentation
Hopeful dot.coms are having a hard time to find investors and customers
The promise and the pitfalls of the internet were on centre stage at the UK Internet Summit in London this Wednesday.

Chancellor Gordon Brown opened the conference with a message of hope by saying Britain was starting to use net technologies to unleash the creativity and innovation of its people.


The blessings of the new technology give us the means to break down the walls dividing people

Gordon Brown
He acknowledged that a digital divide still exists, and unveiled details of the first schemes that will take computers and net access to some of the most deprived parts of the country and start to close this gap.

But successive speakers at the conference were more cautious, highlighting the obstacles fledgling net businesses and the electronic economy were facing.

At the internet summit in 1999, Mr Brown announced several schemes designed to put computers and net access into the hands of those that, until now, have been unable to afford it.

Ventuire capitalists and web entrepreneurs at a networking meeting of The Chemistry in London
Venture capitalists meeting entrepreneurs are now paying close attention to their business plans
Now one year on, one of the first schemes is being launched in Kensington, Liverpool, where the government will spend 1m giving computers and cheap net access to 2,000 homes.

Alongside the recycled computers will go a training scheme that teaches parents and children how to get the most out of the net, use it to find jobs, contact local and national government and improve their quality of life.

"The blessings of the new technology give us the means to break down the walls dividing people and the problems of exclusion," the chancellor said. "You cannot build a knowledge driven economy without having a knowledge society as well."

Dot.coms fading?

But many speakers at the conference said web businesses faced more fundamental problems than a lack of skilled or educated workers.

Ruth Porat, managing director of Morgan Stanley's Investment Banking Division, said the fact that the stock valuations of the top two web companies in almost every business sector was down at least 25% from their peaks showed that faith in dot.coms was fading.

She said the downward slide and poor profitability of many dot.coms was scaring off venture capital companies and investors alike. "No-one wants to catch a falling knife," she said.

Doubting internet pure-plays

Ms Porat said backers like Morgan Stanley were being much more careful about where they put their money and how a dot.com plans to make money.

Other speakers doubted whether pure-play dot.coms, those that sell only via the web, could survive. They forecast that soon traditional businesses would push them out of the way and take all their customers.

"The problem with a lot of internet businesses is that their underlying economics do not work," said John Browett, chief executive of Tesco.com.

"A lot of them are hoping that they will be the only one left in their line of business, which will mean they can put prices up and make money."

By contrast, he said, many more traditional companies had other ways to make money that could be used to offset the initial high costs of doing business via the web.

The UK Internet Summit is organised by The New Statesman magazine, media giant WPP.com and telecommunications company WorldCom and brings together policy makers and business leaders to talk about the best way to exploit and embrace the internet.

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Background:
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