Internet stock market valuations "temporary glitch"

Don't panic. The internet is still here. Everything is going to be OK.

          Don't panic. The internet is still here. Everything is going to be OK.

          Dismissing this year's collapse in stock market valuations as a temporary glitch, Barry Schuler, America Online’s president for interactive services, tried to assuage the fears of the internet business community in a speech Wednesday at the Internet World trade show in New York.

          "It's our hub for AOL-anywhere," the practice of making AOL available on computers, PDAs, cell-phones and other internet-equipped devices, Schuler says. The newest version is better designed to handle display on multiple kinds of devices, he says.

          Talking about the economy, Schuler likens talk about the bursting internet bubble to the concerns investors had for AOL’s future in 1996, "the summer of hell," as he put it.

          At that time, AOL's stock tanked after a series of highly public problems consumers had connecting to its service, and after a quarter that fell out of line with investors' expectations. "People were questioning our business model," he says. "They said, ‘You aren’t going anywhere until you show us how you’re going to make money."

          Sounds familiar?

          He likened AOL’s struggles – and eventual return to market strength – to the current dot-com shake-out … with a caveat or two. "The internet wasn’t as well known then," he says. "There was not e-everything, e-everywhere. That was just five years ago."

          It was also harder for start-up businesses to find venture capital money, for a time. In people’s haste to condemn the internet economy, he says people fail to place the blame where it belongs: on the shoulders of chief executive officers with bad business plans and the venture capitalists who didn’t notice.

          "I think we have to be more careful about what new businesses get funded," he says. "The industry is suffering from a speculation hangover … We’re seeing an anomaly in the market, but it’s looking through a market prism."

          Schuler praised the fundamental market-building qualities of the internet revolution – that email is replacing the post office, that more than half of people online have made purchases over the internet, that it has become common for people to trade stocks and read news online.

          "Sometimes Main Street and Wall Street separate … The internet is incredibly empowering (and) when consumers come in the millions, they transform businesses," he said.

          Likening the continuing impact of the internet to the industrial revolution, Schuler says consumers can look forward to being able to access the internet from a wide variety of devices, like televisions, phones, personal computers and stereo systems. Each will begin to take on some of the form and functions of the others, he says.

          "In the next five to ten years, your television, your phone and your computer will be the same thing. They’ll all run on a big broadband pipe into your home and it’s the internet that will make it possible."

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