VideoIf any one group helped fuel the E-commerce frenzy of the late nineties, it was the industry research outfits. From 1998 to 2000, companies such as Forrester Research, Gartner, IDC, Jupiter Media Metrix, and Gomez Advisors came out with almost daily predictions about the enormous revenues that would be generated in cyberspace.
Now that the bloom is off the virtual rose, however, those very same researchers are taking a pillorying in the business press. In fact, a number of articles have recently suggested that, given the earlier miscalculations of the research companies, any future predictions should be taken with a grain of salt.
But representatives at companies that were one-time New Economy cheerleaders say their analysts deserve a second chance. According to a Reuters report, Forrester group director of research John McCarthy says that, given the recent bashing of E-commerce research firms, those firms have been ''forced to defend --and in some cases modify--our integrity, methodology and objectivity.''
To be fair, we're guessing McCarthy didn't mean to suggest that Forrester would has been modifying its integrity. Instead, many of the research firms have been revising their once-Pollyannaish predictions. ''To date, through the middle of 2001, most of the numbers out there have been conservative, across the board,'' McCarthy says. Forrester's revenue forecast for the 2000 business-to- business sector, for instance, was $406 million. In reality, that sector generated over $600 million in sales, the article notes.
Of course, this raises the question: Why were the earlier predictions so high? Associate professor Ranjay Gulati of the Northwestern University's Kellogg School of Management faults research firms' reliance on ''experts'' who sometimes had vested interests in E- commerce companies they touted. He also notes that ground rules for defining the fundamentals of E-commerce sectors frequently shifted as these brand-new markets evolved. ''They all had a different definition of B2B, for example,'' Gulati says, ''and no one was transparent on exactly how or what they measured.''
But Alan Alper, an analyst at Gomez, defends the work done by the E- commerce research companies. ''[It's easy] with a rear-view mirror perspective to say, yes, definitions were a little squishy,'' Alper notes. And while he grants many analysts looked through ''rose-colored glasses,'' he insists that researchers did a good job, considering the frenetic pace of the market. ''Things were moving so quickly. We were trying to use reasonably good filters without getting too enthusiastic.''
Meanwhile, the revenues at many of these research houses have taken a tumble of late--mirroring the markets they cover.
A Bank Pulls Back
Giant Dutch bank ABN Amro is paring its expansive plans for global investment banking and corporate-banking services.
The big news to most analysts is that, apparently, ABN isn't a candidate anymore to buy a marquee U.S. investment bank. But the change at ABN also suggests the company will stop developing new corporate E-banking business in America, where it was a leader.
While U.S. banks have been relatively shy about pumping bucks into Web-based corporate services, ABN had courted U.S. corporate clients with a high-tech pitch. (See " Slow Connection," CFO June 2000.) But finding companies willing to expand their use of Internet-based banking services has been a hard sell for ABN, and a few other banks that have built those capabilities. The likely last straw for ABN's corporate-banking growth plans is the company's 4.9-percent slippage in wholesale revenue for the second quarter, with commissions plunging 26.4 percent. In comparison, retail revenues went up during that time period. ABN management now says it will cut capital allocated to wholesale banking by 20 percent over three years.
Converting to Convertibles
Convertible bond issuance continues at a breakneck pace, according to S&P's mid-quarter commentary. As the third period winds down, the $55-billion year-to-date volume, on 113 issues, is only $2 billion short of last year's all-time record.
In the first half of the third period alone, corporates have issued $10 billion in 21 offerings, compared with $5 billion in 16 offerings during the comparable span in 2000. The year-to-date volume last year was $36 billion, on 94 issues. But with the falloff in the IPO market, investment banks have been competing to win corporate clients' convertible offerings, giving companies a relatively cheap access to capital markets.
Surprisingly, straight corporate bond-offering volume plunged during the first half of the third quarter -- down some 50 percent from the previous year. ( Click here for the article.)That's a big turnaround. In the first half of 2001, bond issuance soared -- thanks to six Fed interest rate cuts.
The next rate cut is expected to come Tuesday afternoon, as the Fed tries again to jolt the barely-growing U.S. economy.
CFOs at the Wheel
Ford Motor Co. will cut up to 5,000 white-collar jobs and take $900 million of charges. In light of the axe falling at Ford, the industry's top finance chiefs are now predicting more auto-related troubles.
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