When Giants Stumble

When one of the towering leviathans of high-tech civilization takes a false step, it is not always immediately clear whether the tremors in the earth are caused by the giant’s stumble or by the stampede of all the little people fleeing for cover.

The outcome is the same: things fall apart. Perhaps in the quake prone world of e-commerce, the damage could be lessened through a re-evaluation of what it means to be giant-sized.

There is a pervasive and dangerous perception that because a company has achieved a certain measure — even a huge measure — of success, it is incapable of making a mistake. Such an assumption leads to the unwarranted conclusion that once a major player succumbs to error, it is doomed.

Asking for Trouble

The worst possible byproduct of such reasoning is that in the panic preceding an expectation of disaster, the rampaging masses may create a disaster that might otherwise not have occurred.

Such a scenario has already played out several times in the e-commerce world. A company that is riding high falters — whether over business practices, policies, products or bad planning. The market reacts. Investors pull the plug, and that is the end of the house that Jack built.

Of course, the great ones can weather more than one such debacle, but it is difficult to measure how much the foundation of e-commerce is unnecessarily weakened by what boils down to a matter of expectations.

Microsoft Chained

The Microsoft antitrust case is far from a done deal, but it serves as a good case in point. The U.S. Department of Justice (DOJ) is literally seeking to cut the biggest giant of them all down to size through its antitrust action against the software titan. The company’s stock reeled when the DOJ set to the task of ending Microsoft’s monopoly by recommending a breakup of the firm.

The mere fact that Microsoft met with defeat at various stages of the court battle was enough to seriously dull its gloss. But negative investor reactions seemed to overlook the analyst commentaries that strongly suggested a healthy future ahead for the company — or companies — regardless of how many pieces Microsoft finds itself in when the dust finally settles.

CDNow or CDThen?

Earlier this year, online music store CDNow made news when it surpassed Amazon as the e-tailer with the largest number of customers buying via home PCs, according to market research firm PC Data. But the good report was not enough to prevent a mad investor scramble resulting from the announcement that the company’s planned merger with Columbia House had been scrapped.

The news set off a chain reaction of financial setbacks for CDNow, and although the company has been treading water since then, its future is far from assured. Many e-commerce observers are mystified by the plight of the music e-tailer, questioning how a company with both an enormous customer base and massive revenues could so quickly become a Wall Street pariah.

A Giant Roars

Even venerable Internet giant Amazon.com has been faced with some pretty tough music, of late, with analyst speculation over when the company would turn the profit corner morphing into dire warnings that Amazon might not have enough cash to outlive the year 2000.

Although founder and CEO Jeff Bezos quickly made a strident rebuttal — symbolically waving a billion dollar bill in the analysts’ faces as he assured the world that Amazon was alive, well and about to break another e-commerce record with the delivery of the latest Harry Potter book — the company’s shares took a nosedive and reached a 52-week low.

Of course, stock market rebounds occur when the panic wears off, but even so, the entire story is not told by share prices. The long term effects of e-commerce’s manic-depressive mood swings defy concrete measurement, but it is evident that more than a few clouds have gathered in the bright blue Internet sky, and some of them seem to be developing into thunderheads.

A Really Big Shoe

Just seven months after rolling out its WebPC, Dell announced that it would stop selling the consumer-oriented product line. The news should not have created much of a ripple — the product was the victim of an illogical pricing structure that made it impossible to compete — but the fact that it was the much revered Dell who made the error in judgment set off some tremors.

Dell deserves some lumps for mishandling the product, but one goof is not an indication that the company is about to begin a descent into oblivion.

Though still a little wet behind the ears, e-commerce should now have enough maturity as an industry to start casting information about its most prodigious companies in shades of gray, rather than stark black and white. Expectations should be adjusted to correspond with the reality that even the most indomitable organizations are helmed by human beings.

Otherwise, the time may come when every report of a mistake or misbehavior on the part of an Internet leading light will no longer result in the predictable investor dance, but instead will invite a terrifying lull when the e-commerce world will stand still and wait for a really big shoe to drop.

Leave a Comment

Please sign in to post or reply to a comment. New users create a free account.

LinuxInsider Channels