Guy Kewney

Over the next three months, you can expect to read some astonishingly enthusiastic comments on an amazingly dull bunch of companies that make really uninteresting high-tech products.

The reason is simple. All the venture capitalists, encouraged by rising share prices, are trying to 'implement the exit strategy', or pull their money out as you and I might say.

More often than not, the first clue you get that a company is planning to go public with its shares is when 'profile' articles start appearing.

They work like this: a PR company rings a journalist. 'I don't know whether you're interested, but the CEO of a rather interesting American/Chinese/Russian company will be in London next week. It looks like the sort of outfit you'd be interested in.'

Then the CEO, who normally refuses to answer the phone to anybody under the rank of chief technical officer, 'makes some time available' and buys the journalist lunch.

During this lunch, all sorts of fascinating details about the technology behind the company, and the rival companies, are revealed.

An article swiftly appears praising the company and enthusing about its future. The shares go public. Those in the know shake their heads sadly, and invest their money in bonds.

The thing is, until the end of 2003, most PC companies looked like dead ducks from an investment point of view.

Big venture capitalists had sunk large sums into them three years ago in the expectation of seeing their investment treble in six months, only to discover that they owned a substantial share of the square root of nothing at all and couldn't sell the shares at any price.

Now, with the revival in the market for PCs, there's a window of opportunity: find a sucker, shift the shares and run before the market collapses again.

And so you're finding that at technical conferences and conventions, the 'elevator pitch' is becoming a bigger highlight than the technical seminar.

Two or three of my friends are now venture capitalists, and I'd like to assure you guys (you know who you are!) that when I say: 'All venture capitalists are b*****s' I don't mean you. But in general they are power-mad, money-obsessed, and surprisingly unintelligent, and with the scruples of a vulture.

I know times have been hard for the past three years, but that doesn't excuse some of the unprofessional behaviour I've witnessed in high tech sector.

I've seen people disclose their secret business plan to a venture capitalist doing 'due diligence', only to find that said venture capitalist has passed every scrap of data over to the dominant company in that industry.

I've seen people find secondary sources of finance at half the interest rate the venture capitalist was asking, only for the venture capitalist to threaten to wind up the company rather than let anybody else share in the profit.

And I've seen perfectly good companies wound up, because some egomaniac in finance wanted to prove that he was 'in charge' and that he wasn't going to be told what to do by the founder of the company, even if the founder knew what he was doing and the venture capitalist didn't.

These people, when trying to get their funds out of a company, make used-car sales executives look like George Washington, who could not tell a lie. They will claim that their protégé corporations are capable of being the next Microsoft, the next Intel and the next Cisco all rolled into one.

They'll commission 'market research' from needy consultants saying, literally, 'Get us some figures which show this market growing at 250 per cent a year for the next four years.'

Needing good news to write journalists often fall for this and praise start-ups, refinancings, and takeovers, which should carry a stark red warning label saying: 'Bargepole contact only!'

My judgement is simple: in most computing sectors, there is going to be a huge growth in the number of people using or buying products and services. But at the same time, the prices charged for these products and services is going to plummet.

I dare say an awful lot of us in the computer sector will carry on working, and getting paid, but the trend is clear: work longer and harder, but get paid less. Profits in PCs are not going up, and neither is product quality.

More and more, you will find that the hardware you buy is built 'to a price' and components will burn out after a few months, leaving you with a metal shell with 'no user-serviceable parts' inside and, quite probably, only a bankrupt supplier to complain to.

I can't say, in a public arena, which companies I expect will go bust or get swallowed, but the economic recovery is shallow, and simply won't refloat some of the beached hulks out there.

Some of them only appear to be floating because they're stuck in mud. If the tide does come in, they'll fill with water.

Hence the need to hype. Hype always happens, of course. I just thought you ought to be aware that there's going to be a plague of it in the next quarter.

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