Compiled ByDave Schafer Despite widening losses, deteriorating cash flows, and increased difficulty in raising capital, there are still a few e-business sub-sectors that retained or even grew their market value in the last 12 months, according to a new study. The study, "Asia E-Business Economy Stock Market Value Flow," conducted by New York-based Mercer Management Consulting Inc., analyzed the performance of more than 170 e-business organizations in eight major Asian countries, Mercer says. The firm found a fundamental redistribution of value is under way in the 'Net economy, helped along by declines at the majority of organizations within six investigated segments. "Value is rapidly flowing to the few remaining profitable companies," says Raymond Tsang, the Hong Kong-based Mercer principal who led the study. As of April only about half the pure-play e-business companies were profitable in the year 2000, and they controlled over 80% of the sector's market value. Mercer says the study showed capital is still flowing to the marketing consultants, business-to-consumers (B2C) e-commerce organizations, online brokers, and application service providers. Nearly 20 companies in these sectors went public in 2000. But those findings were among the few bright spots in the report. Other key findings:
- The combined e-business sector market value in Asia fell from its peak at $280 billion in the fourth quarter of 1999 to roughly $60 billion by the end of the first quarter of 2001.
- The study found only 26% of the companies have been able to hold their market value above IPO value. Among all sectors, the software and infrastructure players appear to be the most resilient to the market crash, with 55% and 30% of the companies exceeding their IPO value, respectively. In contrast, less than 10% of the business-to-business (B2B) and the ISP players have been able to hold their IPO value.
- There is widespread evidence of shareholder value destruction, including a 94% loss this year among the ISP companies and more than 80% losses incurred by B2C portals and B2B/2C software companies.