Dotcom bubble burst: 10 years on
By Jorn Madslien
Business reporter, BBC News
On 10 March 2000, the Nasdaq index of leading technology shares spiked,
bursting the Dotcom bubble.
The decade that has passed since has brought a new realism to the internet
economy.
The Nasdaq has failed to recover and currently trades at less than half its peak value
on 10 March 2000 as investors are once again looking for real returns and for
fundamental underlying value.
But technology is playing a much greater role in most people's lives than it did when
the bubble burst, so clearly many tech firms are thriving.
Some have even grown sufficiently to join blue-chip indexes instead, so the Nasdaq
is perhaps no longer the best barometer of the health of what was once deemed the
"new economy".
What they said then
These days, nobody uses the term.
Indeed, even on 10 March 2000 one analyst said: "A lot of people are tired of
hearing about the new economy versus the old economy".
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At the time, the Nasdaq had risen 24% since the end of 1999 while the Dow Jones
index of leading industrial shares had fallen 13%.
And the analyst, who was with Prudential Securities, was convinced the Nasdaq
would smash through the 6,000-level within 12 to 18 months.
"If you're an astute observer, your portfolio will reflect what's new and exciting and
dynamic," he said at the time, insisting that "a lot of those are the companies that
are in the Nasdaq".
Another analyst, from the since collapsed Lehman Brothers, was equally eager to
justify the Nasdaq's strength.
"It may ease off here and there, we may find the Nasdaq being a little overvalued at
some point, but in general it's the way of the future," he said on 10 March 2000.
Greed and fear
Oh, how wrong he was.
And how we all laugh as we look back at a time when the talk was more important
than the walk, and when scruffy entrepreneurs were courted by greedy venture
capitalists (VCs), their ties hidden in their pockets.
"I remember walking into a First Tuesday event at Lord's Cricket Ground, and there
were thousands of people there creating a very special energy," recalls Mark Simon,
founder of The Chemistry Club, which at the time brought together VCs with
budding entrepreneurs.
"At the time, I thought 'there's got to be a way of making money here', but of course
I was wrong'."
Poor infrastructure
But it is easy to be wise after the event.
And it is equally easy to forget that in fact there were plenty of good ideas around at
the time.
"A lot of the business plans were deeply flawed," acknowledges Mr. Simon.
"But a lot of the ideas that were around at the time would have worked had there
been broadband."
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History of Yahoo
In January 1994, Jerry Yang and David Filo were Electrical Engineering graduate
students at Stanford University when they created a website named "David and
Jerry's Guide to the World Wide Web". David and Jerry's Guide to the World Wide
Web was a directory of other web sites, organized in a hierarchy, as opposed to a
searchable index of pages. In April 1994, "David and Jerry's Guide to the World Wide
Web" was renamed "Yahoo!". The yahoo.com domain was created on January 18,
1995.
Yahoo! grew rapidly throughout the 1990s. Like many search engines and web
directories, Yahoo! diversified into a Web portal. It also made many high-profile
acquisitions. Its stock price skyrocketed during the dot-com bubble, Yahoo! stocks
closing at an all-time high of $118.75 a share on 3 January 2000. However, after the
dot-com bubble burst, it settled at a post-bubble low of $4.05 on 26 September
2001 (adjusted for splits).
In 2000, Yahoo! began using Google for search results. Over the next four years, it
developed its own search technologies, which it began using in 2004. Yahoo! also
revamped its mail service to compete with Google's Gmail in 2007. The company
struggled through 2008, with several large layoffs.
In February 2008, Microsoft Corporation made an unsolicited bid to acquire Yahoo!
for USD $44.6 billion. Yahoo! subsequently formally rejected the bid, claiming that
it "substantially undervalues" Yahoo! and was not in the interest of its shareholders.
Three years later, Yahoo! had a stock market capitalization of USD $22.24 billion.
Carol Bartz replaced cofounder Jerry Yang in January 2009.
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Yahoo Stock Price
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